It’s a mystery to me why bitcoin for 3 months has traded in a profoundly minuscule range. Two years ago, the world’s digital asset was routinely putting in 25% daily moves up or down (usually up). Today, it trades like the two-year bond during zero-interest rate policy.
Of course, there are more over-the-counter desks, high-frequency trading firms & market makers than before but there were plenty of those during the financial crisis – as volatility erupted. US equity markets are patently more volatile than bitcoin nowadays as every Trump Tweet sends stocks flying. Incredibly, the SEC once cited “excessive volatility”‘ as justification for denying a bitcoin ETF.
The risk is in the alt-coin air, no doubt. For weeks, virtually every day some no-name token soars 50-100+%. These could be illegal pump & dumps; or simply a bull trap.
I heard a stat there are now 775 crypto hedge funds globally. I understand the mind of a trader. When markets stall, they chase alpha. They don’t get paid by posting pedestrian returns.
This isn’t an annuity, after all. Investors want significant upside for corresponding risks. This scenario lights a match under risk. And here we are. Alt-coins are in a leadership position as 2019 kicks into full gear -a scenario almost no one, certainly me, saw coming.