What is the reason behind Bitcoin Becoming a Bit Boring?
The BTC or Bitcoin market has been quite hushed in the recent times. Why is that the case?
According to statistics, Bitcoins volatility levels have plunged drastically, so much that it has not seen such a drop since the year 2017. Recent weeks observations show that Bitcoin has fallen behind as investors pile into altcoins such as Cardano (ADA) and Chainlink (LINK).
One possible explanation for this plunge of Bitcoin can be the increase in the presence of HFT or high-frequency trading firm emerging in Crypto in recent months. It is becoming somewhat visible that HFT is of the major grounds for Bitcoin becoming boring and experiencing low volatility.
High-frequency trading or HFT and Cryptocurrency
HFT is a trading method that incorporates algorithms to transact many orders in just a matter of seconds. This method has prevailed in the cryptocurrency space for a long duration. But since billionaire Paul Tudor Jones publicized his Bitcoin holdings very recently, many other institutional investors are joining the market in large numbers with each passing day. This may be able to explain the greater usage of high-frequency trading.
You may have heard of Bitfinex. They came out recently to inform the world that between 80 per cent to 90 per cent of the volume of Bitfinex was now being generated by high-frequency trading firms. This was Bitfinex exhibited that the growing usage of high-frequency trading stands for increasing maturity in the digital asset space. But why does this occurrence take place?
The answer to this is that Bitcoin becomes an established asset class that we look forward to the high levels of volatility allied with cryptocurrency to recede.
Bitcoin as we all know is widely known for moving aggressively for a short duration of time. Somewhere around last year investors were reminded that most Bitcoin gains come in the 10 best trading days of the year. This reminder was provided by Tom Lee of Fundstrat. But what is interesting to see is that the increasing presence of HFT may be changing the rule of “10 best trading days” at the same time.
Trading Bitcoin – What Made it So Popular
Bitcoin made headlines several times ever since 2017. Cryptocurrency trading has always remained a popular way to make money amongst traders and Bitcoin always had a major role in this.
Bitcoin Known for Its Transparency of Transactions
Like all other cryptocurrencies, Bitcoin uses a network of computers. It uses the network to validate each transaction in a public ledger. The blockchain technology acts quite like a backbone of all other cryptocurrencies. Corporations and Analysts have always mentioned that blockchain shall be the future of our world. Bitcoin became popular and highly traded because of its transparency in transactions. It can be easily tracked on the network. Every computer has a copy of the transactions which are made. Though the transactions and wallet addresses are visible, there is no scope to link such an address of the wallet to a specific entity or a person. Thus, blockchain technology became one of the most transparent networks of the world. It was also the most anonymous.
Trading Fees Low
Bitcoin transactions are cheap than most other bank payments, especially in case of high-value transactions. Besides, this is quite fast as well. Besides as more and more people started trading Bitcoin its price started increasing further. Low trading fees has always been one of the major attractions.
Easy Access to High Leverage
Traders who were trading Bitcoin CFD’s could profit from bearish as well as bullish markets. As the markets revealed that there could be a rise in price, traders would buy. As it showed that price could fall, traders would short-sell. With leverage, traders could open larger position sizes than the trading account. With a leverage ratio of 100:1, traders could open a position size which is at least 100 times larger than their trading account.
The rising popularity of Bitcoin provided the world an insight into blockchain and its technology. However, lately it is observed that Bitcoin is losing its value with high frequency trading.
