Bitcoin is no longer the preferred cryptocurrency of exchanges

Bitcoin has strangely been at around $20,000 for days and hasn’t ventured much beyond that since June.

This spells trouble for traders and exchanges profiting from bitcoin’s price swings and is opening the door to its arch-rival ether that is moving to a simpler, leaner blockchain.

“Bitcoin isn’t dead, it’s just boring right now, so traders are already looking for alternatives,” said Martin Leinweber, digital asset product strategist at MarketVector.

Bitcoin’s 30-day average volatility has dropped to 2.7% from over 4% in early July, according to data firm Coinglass.

That number has remained below 5% in 2022, even in the most turbulent months of the price “crypto winter” — far from the last five years, when even periods of lower volatility were followed by spikes of up to 7%.

Similarly, an index by CryptoCompare, which uses bitcoin futures contracts to figure out how far prices are likely to change, is at just over 77, down from 90 at the start of the year.

MarketVector’s Leinweber pointed to an increase in trading in ether and its derivatives as a side effect of bitcoin’s moderate volatility.

In fact, the price of ether — the #2 cryptocurrency with a market cap of approximately $190 billion, up from $380 billion for — bitcoin is up 50% since early July, while bitcoin is flat.

Ether is much less volatile, with its highest level being just over 2% in March 2020, the worst market crash during the pandemic, according to data firm Messari.

But it is absorbing much of the current cryptocurrency buzz as it is close to a shift later this month when it will switch to a system where creating new ether tokens will be less energy intensive.

For investors in traditional assets, narrower price swings can look positive. But for many investors and big cogs in the bitcoin and crypto economy, it’s different. Exchanges, for example, make money by charging fees on trades. When volatility drops, trading activity tends to evaporate.

For hedge funds, which tend to trade with price swings, more stable values ​​also offer lower chances of profit.

And what’s behind the drop in bitcoin volatility?

On the one hand, a flight of investors from the broader sector, which means fewer people willing to trade the currency.

Cryptocurrencies have had a hostile year as investors shed risky assets in the face of rising inflation, with bitcoin down around 60% and ether down 55%. Big explosions in two major currencies and the failure of major banks have also eroded confidence in the sector.