You know things are weird when bitcoin is getting less volatile and stocks aren’t.
After surging about a month ago during a frantic sell-off, the 30-day volatility of daily returns from the leading cryptocurrency has dropped in recent days, and is almost back to where it was before the panic started in early March.
Meanwhile, the volatility of the S&P 500 index of large U.S. stocks, which also skyrocketed in March as the coronavirus paralyzed the world’s economies, has plateaued.
What’s causing the S&P to continue its volatility run while even bitcoin is returning to its version of normal? The mixed performance of various stocks within the bellwether index is part of a problem.
“The interesting game now is not S&P 500, but some of the top stocks inside. Just check Tesla and Amazon, they are moving much better than S&P on average,” said Maksim Balashevich CEO of Santiment, a firm that analyzes market data.
To be clear, over the long term bitcoin remains the more volatile investment by a wide margin. And risk assets of all stripes remain subject to wilder swings than usual.
“Investors are generally looking for stability and volatile assets will be sold no matter what they are,” said Denis Vinokourov, head of research at crypto investment brokerage Bequant, regarding the S&P 500’s fraught performance.
Balashevich noted that an index like the S&P 500 doesn’t account for the divergent fortunes of different sectors in a pandemic, where leisure stocks perform badly but online retailers make gains. Crypto beats such a blunt instrument in this environment, he argued.
“I would bet for BTC and ETH,” he said. The S&P 500 will keep struggling as the economy is in a split.”