• Bitcoin resurgence sees a daily high so far of USD 5,948
  • Stablecoins are proving to provide the stability they promised in the face of volatile markets
  • Bitcoin price volatility has hit a record high, but long-term investors are far from worried

Bitcoin is right now in the midst of an unexpected rally — or expected, if you’ve been seeing the signs — and has climbed to a daily high so far of USD 5,948 (CoinDesk) as it records a 12% gain over the past 24 hours.

Other cryptocurrencies are also enjoying this Bitcoin resurgence, with ETH posting USD 128 and XRP just staying above 15.6 cents.

In any event of the market, it now appears that dollar-backed stablecoins are building a case for themselves, as they prove to do just what they promise as digital money, that is, to be stable as an alternative to volatile crypto.

With most major cryptocurrencies now reaching lows not seen since a year ago, with generally every digital asset on the market just above the 2019 lows, people have been looking at stablecoins as a way to preserve value, at least in US dollars.

Stock markets and other commodities have not being doing well, and arguably are worse off. The ASX 200, for example, dropped a further 9% on Monday, it’s worst ever daily loss since 1987 and since the start of the week is over 10% down. Since Friday US stock markets have slid over 11%, while oil is at its lowest price since 2016. Even gold, which has been enjoying a strong showing in recent months, still looks to be slipping down after a USD 1,703 peak on 9 March, with prices today at USD 1,491 per troy ounce.

Stablecoins like Tether (USDT), who are pegged to the US dollar, have been smiling in the face of this economic turmoil, though, as traders, investors and speculators get easier access and increased liquidity when using them to swap for crypto, instead of going traditional gateways of crypto to fiat and fiat to crypto.

CoinDesk Research pulled data from crypto analysts Messari to show that the top US dollar-backed stablecoins have all held on to market capitalization — trading at the same value as deposited assets over the past seven days. These include Paxos Standard (PAX), Tether (USDT), USD Coin (USDC), Binance USD (BUSD) and TrueUSD (TUSD). Digital Asset Capital Management CEO Richard Galvin explained:

“With the significant level of ‘risk-off’ trading in every asset class, cash is again king, and in the crypto market the best representation of that is the more liquid USD [US dollar] stablecoins. Our view is sellers are either doing this with a view to buy back at lower points in the future or because these stablecoins are their best and/or only way to hold US dollars.”

But even on the other side of that, crypto’s increased volatility in recent times have failed to scare away long-term investors, otherwise known as HODLers. CoinDesk’s Omkar Godbole reports that Bitcoin’s price volatility is now pushing record highs, with the world’s most traded digital asset’s three-month implied volatility rising to an all-time high of 6.8% on a daily basis. Based on market data from research firm Skew, this means that it is equivalent to an annualized implied volatility of 130%.

In fact, if data is pulled even further back, we see that the volatility implied had been at a 12-month low of 3.2% on 23 February when Bitcoin was still near to USD 10,000 — those weeks of consolidation that people thought was going to signal the start of a bull run.

Implied volatility is one way of showing the option market’s opinion of Bitcoin’s potential moves, and this record level is thought to be associated with recent selloffs seen when Bitcoin was at USD 10,500 in mid February, before steadily tumbling to USD 3,800 last week.

 

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