Bitcoin Seems Closer to the Digital Gold Status Than Ever Before, but Analysts Have Different Interpretations of Its Evolution

Despite being the pioneering asset of a nascent industry underpinned by a still immature technology, from the very beginning, Bitcoin has drawn comparisons to gold which is one of the world’s oldest means of exchange and remains to this day a highly attractive asset. The correlation stems from Bitcoin’s potential as a store of value and a hedge against inflation. 

Unfortunately, Bitcoin’s ongoing volatility made it impossible for the coin to live up to its digital gold reputation or better-said expectations. Over the years, Bitcoin has gone through several stages of rise and decline, also known as bull and bear markets. The latest crypto winter saw the price of Bitcoin fall from a record high of $69,000 reached in November 2021 to a trading price of only $29,458 at the time of writing. These sharp drops and overall instability have quieted the voices of crypto enthusiasts dubbing Bitcoin the digital gold. 

However, recent developments in Bitcoin’s price evolution have resurfaced the digital gold narrative once again, providing hope on one hand and raising suspicions on the other.  

Bitcoin achieves unprecedented stability  

By now, both crypto supporters and critics are used to Bitcoin moving up and down across the board. For the first category, these movements hold the promise of great returns and offer proof of the coin’s resilience. For the latter, this serves as evidence that Bitcoin and the cohort of currencies that emerged afterwards are a tool for speculation, not an asset that can be used as a reliable exchange method or an investment venue.  

But nobody is used to seeing Bitcoin hold a stable position for a long period of time, which is exactly what’s been happening lately. Bitcoin has entered a period of slow recovery since the start of 2023, and for the better part of the year, it has been hovering near the psychological mark of $30,000 which it briefly surpassed several times. Data provided by digital assets research firm K33 shows that Bitcoin’s 30-day volatility is the lowest it has been in five years. 

By comparison, more established assets like stocks included in the S&P 500 or gold exhibit higher volatility than Bitcoin. This atypical achievement raises many questions as stakeholders don’t know what to make of it or how long it might last. Historically, periods of consolidation have always been followed by periods of volatility, but there’s no guarantee that the scenario will repeat itself this time. 

Conflicting views regarding Bitcoin’s recent evolution 

Bitcoin’s unusual lack of volatility is a reason for optimism for some and a motive for concern for others as the coin’s recent evolution or more appropriately stagnation has attracted different interpretations from crypto experts and financial analysts. 

Some argue that this newfound stability is not a reason for celebration. On the contrary, the fact that Bitcoin is standing still might indicate that traders and investors are losing interest in the asset. Indeed, K33’s report reveals that the low levels of volatility are correlated with the lowest trading volume since November 2020. This is not at all surprising, considering that many traders and investors decided to take a step back from crypto assets after the events of the latest crypto winter of 2022 when bankruptcies, scandals and falling crypto prices were order-of-the-day issues. 

Also, one can’t ignore the fact that while more traditional markets like stocks have bounced back this year, Bitcoin is still far from its previous highs. The price rallies that it has experienced over the past months were short-lived and couldn’t push the asset beyond the $31,400 threshold. Therefore, many experts consider that Bitcoins’ stability is nothing more than a sign of weakness and fading appeal. 

On the opposite end, we have analysts who believe that Bitcoin might be well on its way to making a full recovery. Arguments in this regard are fueled among other things by the idea that Bitcoin has gained more than 50% since the beginning of the year. So, it’s basically a matter of looking at the half-full part of the glass instead of focusing on the half-empty side. This year’s banking crisis and the increasing scrutiny of crypto assets by the government have also contributed to the resurgence of the digital gold narrative. 

But probably the most convincing argument in support of Bitcoin’s potential recovery after this long period of stability is the fast-approaching halving. Bitcoin is less than one year away from having its mining reward cut in half in the upcoming halving event which is expected to take place around April 2024. 

Looking back at Bitcoin’s price movements over the years one can clearly see that the coin entered a period of appreciation approximately one year and a half before each halving. After reducing issuance rewards, the coin rallied until reaching new all-time highs. So far, Bitcoin’s price movements indicate that the asset might behave the same way following the 2024 halving. We’ve seen the coin experience a slow value increase in recent months and then stabilize around the $30,000 mark. 

If Bitcoin remains true to its patterns, the next phase might bring a considerable price surge that could help the crypto break its previous records. Some have gone as far as predicting that Bitcoin could surpass its former highs before the halving event. This bullish outlook is shared by many crypto fans who haven’t lost faith in Bitcoin’s potential as digital gold. 

Wrapping up 

Bitcoin’s low volatility levels are without a doubt a curious development for the king of crypto, so it’s only natural for people to speculate on it. However, it’s difficult to say where the truth lies and which scenario is more plausible. At the moment, all perspectives are viable as things can go in vastly different directions, so the only thing left to do is wait patiently until the picture becomes a bit clearer.