What does it mean that Bitcoin’s recent volatility is lower than the Korea Composite Index (KOSPI)?

Bitcoin (BTC) price fluctuation has recently narrowed to below South Korea’s main stock-market benchmark index, breaking the long-standing impression of Bitcoin as a high-risk investment asset. Analyses indicate that the increased volatility in South Korea’s stock market in recent times has been driven by energy shocks caused by ongoing warfare and a surge in oil prices. Meanwhile, Bitcoin’s trading price has remained within a relatively narrow range of $65,000 to $75,000. In a turbulent geopolitical environment, Bitcoin has been comparatively stable, strengthening its appeal as a hedge. Although Bitcoin has previously been viewed as an asset with extremely high volatility, this situation may be changing.

Bitcoin’s price is steadier than the Korea Composite Index

According to TradingView observational data, Bitcoin’s 30-Day Realized Volatility (30-day realized volatility) has now fallen to 42%, and it has continued to remain at below 50% throughout this month. By comparison, the Korea Composite Index Kospi, whose market cap is about twice that of Bitcoin, saw its volatility spike as high as 74% last week; it is currently around 51%. Taken together, these figures show that, over certain periods, Bitcoin’s price performance has been steadier than that of traditional large stock markets. As of the submission deadline, Bitcoin’s trading price has remained stable in the $65,000 to $75,000 range. The stable price range reflects that market value is shifting.

ETFs support Bitcoin price resilience

The improvement in Bitcoin’s price stability is closely linked to the U.S. approval of a spot exchange-traded fund (Spot ETF) in January 2024. The launch of spot ETFs has brought a large number of professional institutional investors into the market. These institutions enter with risk-management tools and long-term holding strategies, changing a market that had previously been dominated by retail participants. As funding inflow channels become more mature, Bitcoin’s trading depth increases, greatly reducing the impact that any single large trade can have on price. Research by the financial firm River notes that Bitcoin’s recent performance has even outpaced traditional assets such as gold and the S&P 500 index. Increased institutional participation not only strengthens market liquidity, but also enables Bitcoin to exhibit stronger price resilience and hedging characteristics when facing changes in the macroeconomic environment.

Energy supply risks threaten to rattle South Korea’s stock market

As the world’s 14th-largest economy, South Korea’s Kospi has recently seen sharp swings, mainly due to its heavy reliance on fuel imports. Because nearly all of South Korea’s oil and natural gas depend on supply from the Middle East, when conflict breaks out between Iran and related forces and the risk of a disruption to oil supply through the Strait of Hormuz rises, oil prices surge and directly hit the operating costs of Korean industries, triggering major turmoil in the stock market. Data show that after the Kospi index fell from 6,340 points at the end of February to as low as 5,000 points, it later rebounded to a new high of 6,380 points as ceasefire negotiations and the situation eased. This kind of systemic risk arising from disruptions to the energy supply chain is the main factor behind traditional stock markets’ volatility surpassing that of Bitcoin, highlighting the vulnerability of traditional financial markets when faced with geopolitical conflicts. As a digital asset that does not rely on the resource supply chain of any single country or entity, Bitcoin provides the function of a safe-haven for assets, and has performed notably during this U.S.-Iran war-related conflict.

What does this article mean by saying that Bitcoin’s recent volatility is lower than the Korea Composite Index KOSPI? First appeared on Lian News ABMedia.