"Bitcoin's Volatility Plummets, Stablecoins Surge in 2024"

Digital Assets: Evolution and Correlations with Other Asset Classes

Digital assets, particularly cryptocurrencies, have witnessed significant growth and evolution in recent years. This growth has been accompanied by increased correlations with other asset classes, shaping the broader investment landscape.

Bitcoin's Annual Volatility Drops to Record Low

Bitcoin, the world's largest cryptocurrency, experienced a remarkable decline in annual volatility in 2024. Its annualized one-year volatility fell below 50%, a stark contrast to the 80% seen in 2022 and over 100% in 2018. This decline in volatility accompanied a remarkable return of 122.2% for Bitcoin in the same year.

The report attributes Bitcoin's successful year to several factors, including the launch of 11 spot exchange-traded funds (ETFs) in the United States in January, which ARK Invest described as the "most successful ETF launch in history." By the end of 2024, these US spot Bitcoin ETFs had garnered over $100 billion in net assets.

Additionally, after the quadrennial halving event in April, Bitcoin's inflation rate decreased to 0.9%, marking the first time its issuance rate fell below that of gold's long-term supply growth.

Stablecoins Gain Momentum

Stablecoins also saw a breakthrough year in 2024, with their annualized transaction value soaring to $15.6 trillion. This figure surpasses the transaction values of Visa (NYSE:V) and Mastercard (NYSE:MA) by approximately 119% and 200%, respectively. While the number of stablecoin transactions per month reached 110 million, only a fraction of those processed by Visa and Mastercard, the value per stablecoin transaction was significantly higher than those of the card networks.

Regulatory Focus on Stablecoins

On the regulatory front, stablecoins have become a focus for pro-crypto members of Congress. Before the presidential election in November, Senator Bill Hagerty introduced the Clarity for Payment Stablecoins Act of 2024, building on a previous proposal. Earlier in the year, Senators Kirsten Gillibrand and Cynthia Lummis