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Cryptocurrency Volatility Will Provide a Sign of Viability Going Forward

Cryptocurrency Volatility and adoption rates determine each cryptocurrency’s viability going forward.  The objective behind cryptocurrency is not the creation of a digital, privatized currency that is to be hoarded, but rather a currency that is to be used as an alternative and it’s security and scarcity provides it with the value that simulates the behavior of an asset backed currency.  Not all cryptocurrencies are going to enjoy success, Initial Coin Offerings (ICOs) and existing cryptocurrencies will fall by the wayside.  Even a powerful and popular cryptocurrency could eventually fall out of favor for others, it’s a free market to determine mediums of exchange.  A key factor in getting people and businesses to adopt a cryptocurrency is the stability of the currency’s value, the lower the volatility, the better the odds of attracting better adoption rates.

Cryptocurrency Volatility:  Bitcoin Price Analysis

BTCUSD Volatility - Average True Range Percentage

The Average True Range percentage is used on a daily chart to illustrate how over the length of a 30 day period and a 1 day period how the volatility of Bitcoin has changed over time.  Bitcoin rallied against the U.S. Dollar during the run-up to the Christmas Holiday in 2017, it was a time of extremely high volatility on the positive side making many people Millionaires and Billionaires in United States Dollars in the process.  The sell-off took place just in time for many to buy their gifts, plan last-minute holidays, and collect their earnings before enjoying the season without having to work about price fluctuations.

The BTCUSD rate is higher now, but the volatility is lower than it was prior to the run-up in price.  This is a good sign and if the volatility continues to fall while the price remains, it is a good sign.  Cryptocurrency Volatility often takes its lead from Bitcoin, which is the most visible of the cryptocurrencies.  Bitcoin Price Analysis along with examining its volatility is often the first place to start when examining the health of all privatized currency, but what is not often done is comparing cryptocurrency volatility with sovereign currency volatility.  The objective is not to compare BTCUSD, ETHUSD, or others to the largest traded currency pair by volume in the world (EURUSD), but rather where does it stack up with other sovereign currency pairs so that there is some sort of a gauge to determine whether it has reached the mainstream.

bitcoin price analysis

On a pure Average True Range view rather than using percentages, BTCUSD is in a better place as far as volatility than it was just before the big breakout in late November 2017 that went through mid-December 2017.  BTCUSD is at a higher price and it has a lower Average True Range on both the daily and 30 day Simple Moving Average measurements.  Simply put, Bitcoin is maturing and the hysteria of November 2017 may have forced some participants to take on a more mature approach toward cryptocurrencies beyond seeing it as a “get rich quick scheme” or “gold rush”.  The volatility of Bitcoin keeps falling, which is a good sign and if the price maintains itself, it’s a sign of strength.

Contrast BTCUSD with a few minor currency pairs on the FX Market and see if the volatility is at the right level.

nzdusd volatility

On a percentage basis, when it comes to the most established cryptocurrency’s volatility contrasted against NZDUSD (New Zealand Dollar/United States Dollar), it is not at the level of volatility to create a level of association with an FX pair that is one of the minor major currency pairs.

usdmxn volatility peso

Is it on the same volatility level as USDMXN?  The cryptocurrency volatility does not quite match the relative price stability as the United States Dollar against the currency pair of its southern neighbor.

usdzar volatility

USDZAR is the Currency Pair of the United States Dollar against the South African Rand.  There’s volatility with the South African Rand, but it is still a level of volatility that cryptocurrencies wish to reach.

The goal it would seem for Bitcoin and other cryptocurrencies would be to reach a level of volatility on par with these currency pairs.  Reaching a monthly Average True Range of 1.5% or 1.75% would put a cryptocurrencies into a category of stability, which would create a comfort level for those who utilize a cryptocurrency.  Hastening maturation and avoiding decline may be the goal as growth stages offer more of a rocky road on the business life cycle of a cryptocurrency.

A Look at Cryptocurrency Volatility Beyond Bitcoin Price Analysis

Ripple/Dollar (XRPUSD) Volatility

xrpusd ripple volatility

Ripple is still far too volatile and new.  It exploded during the cryptocurrency boom of 2017 and busted nearly just as quickly.  The big difference between now and then is that volatility is lower now than it was back when Ripple was trading for less than 30 cents USD.  Ripple is double the price now and is in healthier shape, but it needs to pare off volatility significantly if it hopes to have the adoption levels of the mainstream public.

Cryptocurrency Volatilities of Others

cryptocurrency volatility

cryptocurrency volatility

cryptocurrency volatility

They all have the same sort of issue, they are still too volatile.  There’s a reason why sovereign currency pairs can be traded with higher levels of leverages and these cryptocurrencies cannot.  Cryptocurrency volatility is far too high right now to be traded with higher levels of leverage and it certainly causes anxiety for average individuals who want to use these private currencies in their everyday lives.

These cryptocurrencies have not reached the maturity phase of the business life cycle.

cryptocurrency volatility

The cryptocurrency volatility is proof enough right now, but it does not mean that they will not reach maturity.