Bitcoin is undergoing a transformation in its market dynamics, with a major decrease in its volatility. Matt Hougan, the Chief Investment Officer at Bitwise Asset Management, says bitcoin may soon lose its label as a volatile investment. This change is driven by the large reduction in price fluctuations over the past decade.

ETFs are changing the bitcoin market

A big change for bitcoin was the arrival of the first exchange-traded funds (ETFs) on January 11. Since then, the value of bitcoin has increased by more than 50%. It even hit an all-time high of over $73,000 this week. Hougan explains that there is now more demand for bitcoin through these ETFs, while the supply is not growing quickly, especially with the bitcoin halving that will happen in April.

As demand increases and supply slows down, the price of bitcoin is rising. Despite the good numbers, Hougan admits that bitcoin may not be for everyone as it is known for volatility. It can change value quickly and some people find it difficult to understand.

Going short on Bitcoin does not work out well

In addition to Bitwise, ProShares also has an ETF, the Short Bitcoin Strategy ETF. This is intended to make a profit if the value of bitcoin falls. Despite a 42% decline this year and a nearly 70% decline last year, Simeon Hyman, ProShares’ Global Investment Strategist, remains optimistic. For example, he quotes Mark Twain’s words, “Reports of our demise have been greatly exaggerated,” to express confidence in the role of the ETF as an important alternative in the marketplace.

Hyman emphasizes that bitcoin’s power existed before the launch of spot bitcoin ETFs, pointing to its resilience during the collapse of crypto-related financial institutions last year, such as FTX. Hyman therefore believes that there will be several times in the future when bitcoin will fall sharply, for example due to the collapse of major players in the market. This suggests that Hyman continues to believe in this volatile bitcoin market.


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