Bitcoin is getting boring. That could open more doors for the crypto asset on Wall Street.

Adam

Summary:

Bitcoin’s volatility has dropped to historic lows as corporations stockpile over 6% of supply, stabilizing prices. JPMorgan says this “private QE” boosts Wall Street appeal, with adoption expanding under favorable Trump-era policies.

Bitcoin's (BTC-USD) range of wild price swings has come down this year. The key reason? It may have to do with companies rapidly stockpiling the asset, according to JPMorgan strategists.

The largest cryptocurrency's three- and six-month rolling volatility, meaning the speed and extent of its price changes over those time periods, has fallen to a historically low level. This trend has continued even as bitcoin's price set new record highs in May, July, and August.

Bitcoin fell to $108,000 as of Friday afternoon, but jumped to over $109,000 on Monday. It's up over over 17% year to date.

"Corporate treasuries now hold over 6% of bitcoin's total supply and act as a form of private sector quantitative easing for crypto markets," JPMorgan global market strategist Nikolaos Panigirtzoglou wrote in a client note on Thursday.

"We believe a factor behind the collapse in bitcoin volatility has been the acceleration of bitcoin purchases by corporate treasuries," Panigirtzoglou added.

Over the roughly 16 years that bitcoin has been around, its market price has seen wild swings, often at magnitudes far greater than more widely held assets like bonds, gold, and many stocks and its still widely perceived as more volatile than those assets.

However, the range of its swings has been narrowing and a key factor has been the launch of new bitcoin-related financial products like futures contracts and exchange-traded funds that have brought in more investor groups.

This year, the biggest new wave has been public and private corporations seeking to put the crypto asset on their balance sheet in a play pioneered years ago by Michael Saylor's Strategy (MSTR) (formerly MicroStrategy).

Since the Tysons Corner, Va.-based enterprise software company started purchasing the digital asset in 2020, it has become a bitcoin juggernaut. And founder Saylor has made a name for himself as the evangelist of bitcoin adoption for corporates.

For example, from the president's own namesake, Trump Media & Technology Group (DJT), to video game retailer GameStop (GME), a Japanese hotel operator called Metaplanet (MTPLF), and others, these companies have picked up tens of billions of dollars' worth of bitcoin since the beginning of January, according to data aggregator Bitcoin Treasuries.

In July alone, public companies snapped up "nearly two-thirds” of total bitcoin purchases among the biggest buyers: exchange-traded products, governments, and public and private companies, according to a recent Bitcoin Treasuries report.

Such a development may have wide implications for how much bitcoin other kinds of investors could own, according to JPMorgan's Panigirtzoglou.

By lowering bitcoin's volatility, these new buyers could make bitcoin "more attractive from a valuation point of view," Panigirtzoglou said, adding that as its volatility drops, bitcoin could become a more competitive alternative to gold. While volatility doesn't equal outright investment risk, it represents a key component.

Between Washington, D.C., and Wall Street, the crypto world has already seen some major wins this year.

Earlier in August, crypto rallied after Trump signed an executive order that directs federal agencies to remove regulatory barriers blocking access to alternative assets and crypto from being offered in 401(K) other defined-contribution retirement plans.

Weeks before, Trump signed a bill that will allow US banks to issue their own dollar-pegged stablecoin. A week before big bank executives, including Citigroup's Jane Fraser and JPMorgan Chase's Jamie Dimon, have said they are exploring that business.

And in late May, Federal Housing Finance Agency Director William Pulte ordered Fannie Mae and Freddie Mac to come up with a way for the government-sponsored mortgage companies to count crypto holdings as assets on mortgage applications.

While Michael Saylor's Strategy pioneered the gambit of rapidly acquiring crypto assets by issuing a mix of debt and equity years ago, more companies have joined the party this year.

That's due in part to a combination of less burdensome accounting rules and more favorable treatment of crypto by the Trump administration and the simple fact that Saylor's Strategy play has proven successful. Strategy's stock trades at a significant premium to the underlying bitcoin it holds.

Though the length of time that such a phenomenon can last remains a hotly debated topic, approximately 180 other companies have imitated the play.

Of that group, roughly a quarter had stocks trading below the value of the bitcoin they held as of August 22, according to Capriole Investments.

And it's not just bitcoin either.

Corporate treasuries have been loading up on cryptocurrencies such as ether and others in addition to bitcoin. And for those smaller tokens, the reaction so far hasn't been boring.

Trump's namesake media group announced plans to roll out another crypto treasury company just this past week through a partnership with crypto exchange Crypto.com.

Called Trump Media Group CRO Strategy, this company will hold Crypto.com's lesser-known trading platform and blockchain token Cronos (CRO-USD). The token's market capitalization has almost doubled to $9 billion since the Tuesday announcement.

Also known by critics as "money printing," quantitative easing is a less conventional monetary policy tool that the US Federal Reserve used to support the economy during two of the country's most recent financial emergencies, the COVID-19 pandemic and the 2008 financial crisis.

The measure is known to have significant repercussions, such as fueling riskier behavior that can lead to asset bubbles and even future inflation.

Source: finance.yahoo

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