Is institutional money making crypto less volatile, or just delaying volatility

[Glowy]

We often hear that institutional participation is making the crypto market more stable.

But recent price movements still show sharp swings, especially when ETF flows change or large positions unwind.

It feels like volatility hasn’t disappeared, it might just be shifting or being delayed.

Maybe are institutions actually stabilizing the market, or are they simply creating periods of calm before larger moves?

[Charles-Tim]

Maybe are institutions actually stabilizing the market, or are they simply creating periods of calm before larger moves?

If 4 year cycles in relation to halving is used for the volatility estimation since bitcoin was created, you will noticed that the volatility has significantly been decreasing in each cycle. And this has been the lowest volatility for bitcoin since it was created. Even if bitcoin get to $50000, this period still has the lowest volatility as there has been more adoption. Institutions are definitely part of the reasons, but I will just call it adoption to be the reason.

[Bitcoin_Arena]

More liquidity means less volatility. There was a lot of money coming into crypto following the approval of ETFs and trust me, the volatility you see these days is nothing compared to the volatility we would see those days (My primary focus is on BTC and ETH since they are the top coins)

Back then a 20% movement by BTC or ETH seemed normal. Today even just a 10% movement looks catastrophic and tends to trigger a lot of liquidations.

[Glowy]

Maybe are institutions actually stabilizing the market, or are they simply creating periods of calm before larger moves?

If 4 year cycles in relation to halving is used for the volatility estimation since bitcoin was created, you will noticed that the volatility has significantly been decreasing in each cycle. And this has been the lowest volatility for bitcoin since it was created. Even if bitcoin get to $50000, this period still has the lowest volatility as there has been more adoption. Institutions are definitely part of the reasons, but I will just call it adoption to be the reason.

Adoption over time does seem to be reducing volatility, especially compared to earlier cycles.

I wonder though if what we’re seeing now is lower day-to-day volatility, while still having the potential for sharp moves when liquidity shifts or large players reposition.

So maybe volatility isn’t disappearing, just evolving.

[Gozie51]

Maybe are institutions actually stabilizing the market, or are they simply creating periods of calm before larger moves?

I think we have had more of stability or ranging price since first quarter of this year preceding last quarter of last year. It is not that we are not having volatility or that volatility has reduced or that it is the institutional money that has stabilze the market. It is the historical wave of price that after bull, some pull out to stay off the market in the fear of price drop and then the price begins to range pending the inflow of large transaction or anything negative or another halving.

[hugeblack]

Another factor that is being overlooked is that Bitcoin mining has reached 20 million Bitcoins, so all that remains is less than one million Bitcoins, which means that large changes in supply do not affect the price. For example, institutional selling of Bitcoin has become more impactful than halving.

[marrcelo]

I think it’s doing both.
Big institutional money can reduce volatility in normal times because of more liquidity.
But when things go wrong, it can actually make moves bigger and faster.
So it doesn’t remove volatility, it just changes when and how it happens.

[aoluain]

I think it’s doing both.
Big institutional money can reduce volatility in normal times because of more liquidity.
But when things go wrong, it can actually make moves bigger and faster.
So it doesn’t remove volatility, it just changes when and how it happens.

I was thinking along the same lines, more institutional investment means more liquidity which means it
requires more and more to move the market, to create more volatility.

But we live in an era where everyone is connected and everyone can react very quickly to news events
or other events which can and have affected the market. Kind fo like herd mentality.

If such-and-such moves or liquidates a large sum on Bitcoin, others may follow suit and in turn others
act on those movements which obviously will have an effect on the market, possibly some trigger which
on its own shouldnt but because of a chain reaction and a trend creating it creates volatility.

So yea I would just err on the side of 'delaying volatility'

[Bitcoin_Arena]

I think it’s doing both.
Big institutional money can reduce volatility in normal times because of more liquidity.
But when things go wrong, it can actually make moves bigger and faster.
So it doesn’t remove volatility, it just changes when and how it happens.

It's not like all institutions will be buying/longing or selling/shorting at the same time, so even if things go wrong, some people will be buying in large orders while others panic-sell. If your theory were to be applied, then we would have so much volatility in stock markets, for example, since they involve a lot of institutional players.

[Curious T]

Another factor that is being overlooked is that Bitcoin mining has reached 20 million Bitcoins, so all that remains is less than one million Bitcoins, which means that large changes in supply do not affect the price. For example, institutional selling of Bitcoin has become more impactful than halving.

From what I've noticed, halving is still more impactful than institutional selling or buying. In institutional selling, it impacts the market for a short time, and for it to have a major effect, it needs to be a very large sum with a lot of speculation around it. Still, no matter what happens, it would correct itself after a short time. But the halving may have a much slower impact, but it's long-term. The market doesn't start feeling the impact of a reduced supply immediately, but after a while. I guess that is why the peak of most bull seasons is a couple of months after the halving, mostly the next year. 

[uneng]

The volatility is indeed decreasing along the years, and it doesn't seem to be just delayed. I guess if it was a delay, we would have already increasement on the volatility at some point of Bitcoin history, what didn't happen. What we see is a progressive and healthy decreasement of volatility, at same time Bitcoin becomes splitted among more investors, even though we are talking about whales, institutional investors and ETFs.

[hugeblack]

From what I've noticed, halving is still more impactful than institutional selling or buying. In institutional selling, it impacts the market for a short time, and for it to have a major effect, it needs to be a very large sum with a lot of speculation around it. Still, no matter what happens, it would correct itself after a short time. But the halving may have a much slower impact, but it's long-term.

In the past, yes, currently no. The remaining number of Bitcoins to be mined is around 1 million, and this amount is less than what Strategy Inc. (formerly MicroStrategy) and IBIT - BlackRock own. If these two companies selling Bitcoin, their impact will be much greater than the impact of halving for years to come.

[ultrloa]

From what I've noticed, halving is still more impactful than institutional selling or buying. In institutional selling, it impacts the market for a short time, and for it to have a major effect, it needs to be a very large sum with a lot of speculation around it. Still, no matter what happens, it would correct itself after a short time. But the halving may have a much slower impact, but it's long-term.

In the past, yes, currently no. The remaining number of Bitcoins to be mined is around 1 million, and this amount is less than what Strategy Inc. (formerly MicroStrategy) and IBIT - BlackRock own. If these two companies selling Bitcoin, their impact will be much greater than the impact of halving for years to come.

Halving make it more lesser over years and those institutions have those million of Bitcoins these days. It will possibly be catastrophic if those company will start to sold aggressively their Bitcoin holdings. Maybe it will take long time for Bitcoin to recover if that's the case happen even halving might not give those huge result that people wait to happen.

The effect of halving is predictable, but the effect of those companies try to liquidate their asset is for sure so disruptive

[Wiwo]

Institutional inflows of liquidity can affect bitcoin volatility, but mind you that also have it opposite also for example last week there was a movement out of the ETFS balance of liquidity and that resulted into the current dip I'm the market, because of the short-term effects of liquidity pull out from ETFS and what that exposes us to is that there are elements that make instead of constant volatility ETF funds will male cryptocurrency market to become less volatile in the future but still we will have few key factors that will keep the volatility of market happening like.

Leverage position: shifting, market may stay calm for a while but when the leverage market get stricken the market conditions will chagrin along.

Traders sentiment: this can be the day to day activities of traders, I mean whales traders with huge capital movement could change also the face of the market temporary.
ETC

[BluebloodCXVI]

We often hear that institutional participation is making the crypto market more stable.

But recent price movements still show sharp swings, especially when ETF flows change or large positions unwind.

It feels like volatility hasn’t disappeared, it might just be shifting or being delayed.

Maybe are institutions actually stabilizing the market, or are they simply creating periods of calm before larger moves?

Perhaps you should be more specific about which coin you’re talking about in this context, rather than just using vague terms like “crypto”. That being said, i’m assuming that you’re referring to bitcoin in the context of your write up, and I think it’s disrespectful to compare bitcoin with all those other shitcoins. Now you need to understand that not all coins behave the same way or react to the same drivers with the same intensity as others, some coins are even much more influenced by ETF flows and institutional positioning, while other coins still move more based on retail sentiment and a broader market hype. So now when you’re talking about volatility, i think it would probably make more sense to analyze the asset you’re talking about by their personal name rather than treating everything as if they’re are all under the same umbrella.
Now that I’ve pointed out your shortcomings, in the case of bitcoin, i don’t really think the institutions are making it any less volatile than it already is, the only thing i could say is that it just doesn’t move the same way it used to move before. Back then it was mostly retail driving everything, so price would react to sentiment and headlines all the time, but now it’s more about ETF flows, positioning, and broader market liquidity.
So you might get these quiet stretches where nothing much seems to be happening, but that’s usually just balance in the flows, not a true stability. When those flows flip or unwind, BTC can still move pretty aggressively. So the volatility isn’t gone at all, it’s just more flow driven at that point than emotion driven.

[Sergeant Major]

I can just imagine that conversations like this happen:

Big Investment Bank (BIB):  Why did the price of our billions in Bitcoin drop from $90,000 to $60,000?

Crypto Exchanges (CE)  Well, market volatility, buys and sells, political news, etc.  The price is currently $60,000.

BIB - No.  We have billions in your POS coins.  The price will soon be $90,000 again, and go higher.  Make up whatever story you want, but the price will be $90,000 by next week.

CE - Yes sir.

[tabas]

They're helping for the market to get bigger but it's not about them utilizing and making it less volatile. In fact, they're making it more volatile for how big they're holding. And that's because there's a chance for them to manipulate it and dump as heavy as they can be without any announcement and we'll only see that when the market reacted just how as it's reacting right now with all of this heavy correction that we're seeing.

[Ihedioral]

It's could have been better when you State the coin in question . since it's crypto are we going to measure shitcoins to others like Bitcoin moreover I would say

ETF inflow create stable buy pressure, outflows are infrequently

Your foundation trades, structured products and  lending Davenport don't show up on chain, FTX have taught us that institutional leverage just hides until it blows up             
     
I think both are helping for the market to grow bigger

[Ishicryptic]

They're helping for the market to get bigger but it's not about them utilizing and making it less volatile. In fact, they're making it more volatile for how big they're holding. And that's because there's a chance for them to manipulate it and dump as heavy as they can be without any announcement and we'll only see that when the market reacted just how as it's reacting right now with all of this heavy correction that we're seeing.

These institutions are people's businesses and we know that the purpose of creating a business is for profit making so in this sense we can say their aim for coming into the Bitcoin market is not to stabilize the market but to hold and wait for the perfect opportunity to dump it all back into the market. An example is Saylor, who made big promises that he didn't have any plans of selling strategy's stash but he went back on his promise and sold so it's clear that they are not about making the Bitcoin market to be less volatile it is about what they will profit in the market.

[Gozie51]

But recent price movements still show sharp swings, especially when ETF flows change or large positions unwind.

I don't think ETF is a form of regulation for btc, it is the opportunity given for trading btc in exchanges from a common explanation. So I believe regulation is what can control or reduce and determine btc volatility. This is under the control of government to regulate but unfortunately, government can't. Government can only regulate exchanges and if incase exchange makes a regulation of how much btc is held with them, it still won't cause btc not to be held and transacted through decentralized means and P2P or held in decentralized wallets. In other words, institutions or institutional hodling doesn't directly interact with volatility, how?. In fact, if institutions dump or buy btc, it is expected to trigger volatility and not to delay it or cause less of it as the case may be.

So regards to volatile, it is continua and bitcoin halving is part of what causes volatility apart from buy and sell.