ETFs Tame Bitcoin Volatility, Potentially Ushering in New Stability Era

Bitcoin ETFs usher in a new era of price stability, forcing crypto exchanges to rethink their revenue models.

A strong hand drawn male figure providing stability in a line of wooden dominos.
Created by Gabor Kovacs from DailyCoin
  • Bitcoin is now less volatile than in previous cycles.
  • ETF products are said to be a factor in greater price stability.
  • BTC ETFs have been a runaway success, particularly BlackRock’s IBIT.

Cryptocurrency is known for its extreme price volatility, with wild daily double-digit percentage swings in Bitcoin’s value a relatively frequent occurrence. This turbulence is both a risk and a selling point, as fortunes can be rapidly made or lost, drawing in speculative traders who seek to profit from outsized price movements.


However, new data indicates this era of crypto mania may be fading. According to Bloomberg, Bitcoin price swings have become notably more muted in 2024, with average volatility dropping substantially from 2021’s peaks. Analysts point to the arrival of spot Bitcoin ETFs as a key driver in calming chaotic markets. Conversely, crypto exchanges that derive revenue from trading fees are under greater pressure. 

New Era in Bitcoin Price Stability? 

Crypto exchanges are under pressure as Bitcoin volatility appears to be leveling out, a pattern partly attributed to the advent of spot Bitcoin ETFs. Average volatility across digital assets has fallen from around 79% in 2021 to 57% so far in 2024. Notably, there has been an absence in Bitcoin daily price swings of 10% or more in either direction since late 2022.

Chart of Bitcoin daily price swings as a percentage per Bloomberg
Bitcoin daily price swings per Bloomberg

This new era of relative stability is putting significant pressure on crypto exchanges who have grown accustomed to the revenue generated by speculative trading. Many are now dialing back their expectations and forecasting lower volatility this year compared to past cycles. 

It will still be volatile, and there will still be upward momentum on Bitcoin and crypto prices, but I don’t think it’ll be as explosive up and down as prior cycles,” stated Bobby Zagotta, Bitstamp USA CEO.

The launch of spot Bitcoin ETFs in January is a key factor in Bitcoin price stability. These products have encouraged more systematic inflows by increasing market liquidity and offering regulated exposure. This has dampened the wild price swings caused by retail speculation and trading frenzies.

BTC ETFs are a Smash Hit

Aside from the stabilizing effect of BTC ETFs, these investment products have become a runaway success. BlackRock’s IBIT became the fastest ETF to reach $10 billion in assets under management (AUM,) achieving that milestone on March 1. 


Showing no signs of slowing down, IBIT became the fastest ETF to reach $20 billion in AUM on May 30. 

The Bitcoin ETF ecosystem as a whole recently crossed above $50 billion in total AUM in around six months, a threshold that took gold ETFs over five years to reach. This situation highlights the immense pent-up demand from institutional investors for regulated exposure to Bitcoin.

However, some crypto veterans, like Arthur Hayes, worry that the ETFs could have a negative impact. Hayes warned that as asset managers acquire most of Bitcoin’s circulating supply to back the ETFs, it could mean “the potential death of Bitcoin” itself.

Under this scenario, with asset managers holding the majority of the available supply, BTC would not move, and miners would be unable to earn fees, triggering an exodus that would grind the entire system to a halt.

On the Flipside

  • Following the success of BTC ETFs, Wall Street seems determined to roll out altcoin ETF products.
  • Lower volatility could open crypto markets to more risk-averse institutional capital inflows.
  • As speculative trading declines, fundamentals like real-world utility will gain more importance.

Why This Matters

Lower volatility is a double-edged sword for the crypto industry. While ETFs boost legitimacy and institutional capital, they also pressure key players to revamp business models built around crypto speculation.

ETF asset managers continue scooping up significant quantities of Bitcoin.
Spot Bitcoin ETF Holders Reach Record 5% of Total BTC Supply

Toncoin is accused of manipulation, leading to a market cap down valuation.  

Toncoin Market Cap Slashed by $7B: Were Investors Misled?

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Samuel Wan

Samuel Wan is a finance professional turned crypto journalist, known for his insightful reporting on market trends, regulatory changes, and technological developments within the digital asset industry. His ability to simplify complex concepts and report the facts has made him a trusted source in the crypto community. Beyond his writing, Samuel is an active mountain biker and gamer.