Cryptocurrencies showed insane leaps in the last few months of 2021. However, the moves were not as large as anticipated.
"Digital assets have been exhibiting a series of lower lows and lower highs since peaking in market value of around $ 3 trillion in November, "said analysts at Bespoke Investment Group. "The most interesting outcome for price action this year would be lower volatility, regardless of the size of gains or losses in either direction," they added.
Cryptocurrencies are notorious for their volatility as prices can fluctuate in one direction or another without solid catalysts. Over the years, many institutional and retail investors have avoided them precisely because of this factor, so lower volatility could mean that the crypto investor base is expanding as price fluctuations become more muted despite any frustration among professional traders.
TD Ameritrade chief market strategist JJ Kinahan said: "It's hard for an instrument to be a trusted long-term financial play if it has incredible volatility. It just makes people too nervous or too nervous to even be involved, so the more stability a product like that starts to see, the wider the audience it attracts."
Bitcoin, the largest digital token by market value and a great example of volatility, has entered the new year and is trading below its 200-session average this week. It is a key technical indicator that investors look to in order to understand where it might move next. Bitcoin showed a decline on Monday, but on Tuesday it rose 3.3% to $ 47,520.
But the coin's recent plunge caused the whole crypto market to plummet to 39.5%, the lowest value in nearly three years, said Arcane Research.
Katie Stockton, Founder and Managing Partner of Fairlead Strategies, said: "Bitcoin can see support at $ 44,160, although a close above $ 46,335 on Tuesday would confirm a counter-trend signal worth watching closely. If that plays out, the coin could potentially see an oversold bounce and could test $55,644 again."