Cryptocurrency prices have been trading sideways, and despite a recent spike in February, the historical volatility is near the lowest its been in the last 12-months. News that JP Morgan, the banking giant, is expected to release its own cryptocurrency, failed to buoy prices across the cryptocurrency spectrum. Bitcoin trading has been relatively subdued, but a move above the 4,400 level would likely spark a rally that could rrevive the entire cryptocurrency complex.
JP Morgan Introduces a Cryptocurrency
In mid-February JP Morgan the US banking giant announced that it was introducing the “JPM Coin,” which is a cryptocurrency that was created by engineers at the New York-based bank. This blockchain designed digital coin will allow the bank to instantly settle payments between clients and J.P. Morgan. The coin will not float in its value and will be fixed at $1.
The company will use the JPM coin to schedule and transfer cross-border payments as well as issue corporate debt issuance using blockchain technology. The blockchain is the database technology that was used to design bitcoin as well as Litecoin. JP Morgan plans to also use the new coin to create a smart contract that will allow them to verify that a transaction as opposed to older technology such as wire transfers. JP Morgan clients will be issued the digital coins after depositing dollars at the bank and they can use the tokens for a payment or security purchase on the blockchain.
Volatility Remains Subdued
Despite this news that would entice new demand for a payment mechanism across blockchain for banks and financial institutions, the price of bitcoin remains flat. Historical volatility in bitcoin which can be measured by the Bollinger bandwidth is near historical lows. The Bollinger band width subtracts the Bollinger band high from the Bollinger band low, creating a differential of the standard deviation which shows historical volatility.
The chart of bitcoin shows the Bollinger band width moving sideways, and printing a reading of 11%. This means that the past price action of bitcoin shows that prices are moving at a rate which would cause the annual change to be 11%. This compared to the highs on the Bollinger band width which was in December of 2017, near 100%.
Looking Forward at Crypto-Currency Prices
One of the most important concepts is to avoid shorting a quiet market. JP Morgan CEO Jaime Dimon told investors he did not believe there would be any need for cryptocurrencies just one year ago. Now his firm is rolling out a new payment system based on bitcoin. The upside in cryptocurrencies is unlimited, and prices of bitcoin are likely to rise especially if the SEC introduces a bitcoin exchange-traded fund. Prices appear to be attempting to find a bottom, and those who believe in the future of cryptocurrencies might consider this quiet period as an opportunity to purchase bitcoin as the market searches for value.