Dogecoin (DOGE), the popular meme cryptocurrency, has experienced a significant decrease in volatility, making it appear more stable compared to the industry leader, bitcoin (BTC). According to TradingView, DOGE’s 30-day realized volatility was 30% at the time of writing, which is lower than bitcoin’s 35% volatility. Realized volatility is calculated by measuring the standard deviation of a cryptocurrency’s price change over a specific period.
This significant change in DOGE’s volatility is noteworthy considering its historical reputation for being more volatile than bitcoin. This higher volatility has often deterred risk-averse investors from entering the market. Bitcoin, on the other hand, has been around since 2009 and has grown to become a macro asset with increasing institutional participation over the past few years. In contrast, DOGE has traditionally been seen as a less serious cryptocurrency project since its inception in 2013.
However, it is essential to note that DOGE’s reduced volatility does not necessarily imply market maturity. Instead, it is likely a reflection of the lack of investor interest in alternative cryptocurrencies. Bitcoin’s dominance rate, which measures its share in the total crypto market, has increased from nearly 40% to 50% this year. This suggests that liquidity is being drawn away from alternative cryptocurrencies and directed towards bitcoin. While bitcoin’s price has risen by 60% this year, DOGE’s price has declined by just over 12%, as per CoinDesk data.
Key liquidity metrics, such as the aggregate 1% market depth, also support this trend. The aggregate 1% market depth for the top 10 altcoins is lower than that of bitcoin and ether. This metric measures the bids and asks within 1% of the mid-price for order books on major crypto exchanges. Moreover, trading volumes in the spot market have hit a four-year low of $475 billion in August, indicating a decline in market activity.
The low liquidity observed in DOGE and other alternative cryptocurrencies can be attributed to the uncertain regulatory landscape surrounding smaller digital assets. The U.S. Securities and Exchange Commission (SEC) mentioned several altcoins as securities in its lawsuit against major digital asset exchanges Coinbase and Binance. While DOGE and SHIB were not specifically mentioned, the potential for stricter regulations on altcoins could eventually impact meme coins like DOGE.
In conclusion, dogecoin’s recent decline in volatility has made it appear more stable than bitcoin. However, this does not necessarily indicate market maturity and should be interpreted in the context of reduced investor interest in alternative cryptocurrencies. Additionally, the uncertain regulatory outlook for smaller digital assets contributes to the low liquidity in DOGE and other coins. As the cryptocurrency market continues to evolve, it remains to be seen how DOGE and other altcoins will fare amidst changing market dynamics and potential regulatory challenges.
