One asset is shockingly stable during the market sell-off this week — bitcoin

Key Points
  • The cryptocurrency known for its volatility has been uncharacteristically quiet this week, trading in the $6,500 range as stock markets plummeted.
  • Bitcoin is up 1 percent for the week, while the Dow has dropped 3 percent with wild swings throughout the week.
  • Bitcoin’s insulation from broader market wreckage is relatively new — earlier in October $18 billion was wiped off its market cap in a matter of days as the Dow saw its worst day since February.
A woman touches an ATM machine for digital currency Bitcoin in Hong Kong on December 18, 2017.
Anthony Wallace | AFP | Getty Images

As U.S. stock markets went haywire this week, the major cryptocurrency known for giving investors whiplash was surprisingly calm.

Bitcoin is up 1 percent for the week as of Friday afternoon, according to data from CoinDesk, and remained in the $6,500 range without much fanfare.

Equity markets were a different story — the Dow Jones Industrial Average is down almost 3 percent for the week. It ended 500 points higher on Thursday after plummeting a day earlier, then on Friday dropped more than 500 points after some disappointing quarterly results from key tech companies. It later recovered some of that drop.

Fears of an ongoing trade war and rising interest rates added to the sell-off. But Bitcoin's insulation from the market wreckage is relatively new.

Earlier in October, uncertainty around stock markets bled into cryptocurrencies as the Dow dropped as much as 1,300 points in two days, its biggest sell-off since February. Bitcoin dropped 6 percent as the total cryptocurrency market during that time lost $18 billion of its value.

Bitcoin has lost more than 65 percent of its value since nearing a high of $20,000 last year, when retail investors were fanatically pouring into the asset class. The cryptocurrency is still up 14 percent year over year, and was trading near $6,483 Friday, according to CoinDesk.

Its volatility has made it almost impossible to use as a viable payment method. Instead bitcoin has been billed as a store of value, or "digital gold." That safe haven use case also seemed unlikely at certain points this year, as it fell alongside major stock markets.

Gold, a more established safe-haven asset, was up 0.6 percent this week.

Bitcoin simmers down

When the markets capsized in early February, bitcoin lost more than 33 percent of its value in two days, dropping from above $9,000 to below $6,000 in 24 hours. But it seems to be entering a new chapter with lower volatility and far fewer price swings.

This month, bitcoin has seen only one day with a 5 percent move or more, according to data from CoinDesk. It had more than eight of those major price swings in January and February.

Other cryptocurrencies also held up this week. Ether, the second largest in the asset class, is up 0.2 percent while XRP is up 0.4 percent. Still, Brian Kelly, CEO and founder of BKCM, said crypto investors are mostly separated from what's happening in the broader markets.

"I don't know of anyone saying 'Microsoft dropped, I better sell bitcoin to cover my margin'," Kelly told CNBC.

The relentless selling after bitcoin hit $19,000 last year has slowed down, and Kelly said bitcoin seems to have finally found a bottom at $6,000. While retail interest may be "washed out," the market is waiting on a wave of institutional buyers, which Kelly said is "coming but it's slow."

Institutions are increasingly embracing the new asset class. Fidelity launched a custody solution for institutional buyers, which was seen as a missing factor many investors to enter the market. Major endowments like Yale, meanwhile, are already investing in funds dedicated to crypto and its underlying technology, blockchain.

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