Cryptocurrency and Bitcoin trading–infamously known for their volatility–seem to have become relatively “stable overall” as investors have held on to their digital investments, according to research published by Chainalysis on Sept. 24.
Maturing Crypto Market
In its report, the New York-based security company compiled data from the most-traded cryptocurrencies to the least. Based on their total liquidity, the researchers classified the coins broadly under “mainly for speculation and transactions”–for the most liquid–and “investments, lost coins, and pre-mined values”–for the least liquid. The data were further categorized by aggregate monetary supply.
The research concluded that observed monetary aggregates displayed “extremely steady” behavior during the summer months of May to August, with BTC prices stable for 22 percent of the observed period. In comparison, the total amount of BTC held for investment was stable at 30 percent of the period.
The researchers attribute the market behavior to a maturing cryptocurrency investor, which is less susceptible to hype unlike 2017 and sensationalist news fails to influence price action as before.
The study believes market participants and bitcoin investors before 2017 had “different beliefs and expectations” compared to the newer investors, which seems to have “recalibrated” the cryptocurrency market.
As observed, both speculators and long-term investors have maintained their outlook and BTC positions over the recorded summer period, with only fundamentally detrimental news like technology lapses or strict regulatory decisions causing a widespread market plunge.
Both long-term investors and speculators maintained their positions over the summer, reportedly meaning that only a fundamental change like restrictive regulation or technology improvements could cause a market reaction.
Additionally, Chainalysis noted that Bitcoin adoption is steadily gaining momentum, as the company’s user base itself increased in comparison to 2017, regardless of the falling prices.
The report follows a June study by Chainalysis which showed a “switch” from Bitcoin holders to speculators in the first half of 2018. As noted, over 5.1 million BTC was handled by day traders and short-term investors since December 2017, coming close to the number of bitcoins held by long-term investors – over 6 million BTC – for more than a year.
BIS Statements Supplement Findings
Meanwhile, the Chainalysis research was supported by Bank for International Settlements (BIS) report published on Sept. 23. The consortium spans sixty of the world’s central banks and fosters financial stability among global economies.
The report, published by BIS economist Ralph Auer, found out a strong correlation between crypto prices and regulatory interventions in the digital asset market. The connection comes contrary to the core ethos of cryptocurrencies–operating in a frictionless manner irrespective of government policies.
The bank recorded datasets from January 2015 to June 2018 and identified over 151 government proceedings to affect the prices of cryptocurrencies directly, with the most impactful instances recorded from Chinese, Indian, and Japanese regulatory decisions.
The report concluded that investors respond most animatedly to news specific to legal-policies, such as a crypto-ban or acceptance, and the possibilities of bitcoin-trading products akin to traditional security offerings.
Cover Photo by Aleks Dahlberg on Unsplash
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