Bitcoin’s price may not be as per the expectation of the investors, but its volatility is what attracts high-speed traders.
Digital Asset’s Perfect Volatility
In an interview with The Block, Max Boonen, founder of B2C2, stated that bitcoin’s volatility had derived a perfect spectrum for market-making firms and High-speed trading firms. Such traders offer quotes at which market participants can purchase bitcoin. They earn money on the spread between buy and sell orders, that is the difference between buying and selling price.
The coronavirus outbreak has shown a great impact on global markets. The digital assets have shown high volatility due to the uncertainty prevailing across the globe.
Highlighting the positive aspect of volatility in bitcoin’s price Boonen said,
“The volatility at the moment I think is quite Goldilocks. In my opinion, the volatility we have in the market is very good. Any market-making firm should be making a lot of money.”
Price Fluctuation And Bitcoin Crash
10-day volatility for bitcoin came down from 300% in the middle of the month to 125% on Monday, before bitcoin crashed on March 13.
Discussing the volatility, Boonen said,
“We had our record day ever on the 13th. The 12th was a big day, but it was really when the market touched around $4,000 they reassessed their view. That’s where you get the big volume.”
The Current Market Condition is not Favorable For Everyone
Though the volatility in the digital market seems goldilocks for the high-speed traders, it is not favourable for everyone. As the poor liquidity in the market has made it difficult for the traders to enter and exit positions.
Skew’s Emmanuel Goh told The Block that,
“March 12 sell-off has inflicted significant pain to some investors and market-makers, we haven’t seen the number of open futures positions rebounding since then,”
Goh highlighted the Bitcoin futures markets and said that liquidity in the market has dried up, as shown by the open-interest across bitcoin futures markets.