The crypto market is experiencing a period of increased volatility after the flash crash on March 12. Bitcoin, in particular, has been facing one of its toughest weeks, starting at over $ 8,000 to falling below $ 3,600. Currently, BTC fluctuates around $ 5,000.
The volatility of the monthly Bitcoin cryptocurrency jumped to 187% on March 15, surpassing even the values during the 2017 bubble.
Currently, Bitcoin is down 35% from its value earlier this year. It also decreased by over 55% from the maximum value recorded in 2020. According to an analysis by Skew, the volatility recorded in the last ten days is the highest recorded, of 315%. By comparison, at the end of 2017, the 10-day volatility reached the level of 200%.
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Some analysts believe that, in the current situation of the world economy, there is a possibility that the BTC value may fall again in the short term. Antony Pompiano, however, believes that the effects of short-term volatility on Bitcoin will soon be eliminated. Some of the reasons are the support measures of the economy implemented by the Federal Reserve on the American market:
“This is valid in the short term during the liquidity crisis, but the response to the monetary stimulus will be very confident for Bitcoin. In principle, gold went through the same sequence in 2008-2011 ″.
The sharp drop in cryptocurrency prices sent shockwaves across the industry, as exchanges had to cope with a sudden influx of users trying to sell and protect themselves. As orders began to multiply, many platforms experienced problems and increased price volatility.
Does Bitcoin Cryptocurrency Volatility Need Circuit Breakers?
The flash crash on March 12 generated a debate about safety systems, so-called “circuit breakers”. They are frequently used on stock markets – trading activity is automatically stopped temporarily if certain indices fall too much. Last week, these safety systems were triggered twice on the Nasdaq and the New York Stock Exchange.
“Today’s cryptocurrency price developments are a strong argument for circuit breakers in the ecosystem,”
of sustained Thursday Tushar Jain of Multicoin Capital.
“Crypto markets have collapsed today. Large exchanges should work together to prevent such a fire from recurring. The whole DeFi ecosystem is dead today. A few big market participants took it over. Many traders have not been able to literally get money from exchanges fast enough to trade due to blockchain congestion, and extreme volatility has been exacerbated. “
Jain believes that in order to be taken seriously as an investment instrument, cryptocurrencies must have a lower volatility.
An example of the efficiency of circuit breakers was provided by Sam Bankman-Fried, CEO of Alameda Research and the FTX derivatives exchange. He a highlighted that, after BitMEX suspended its activity, the price of Bitcoin returned.
On the other hand, the crypto market is proud of the fact that it works 24/24 and is not controlled by any centralized entity.
“Such circuit breakers can only be used on a completely monopolistic exchange”,
of declared Changpeng Zhao, Binance CEO.
“The free market does not work that way. Bitcoin is traded on multiple platforms ”.