There was a whole lot less sound and fury from the capital markets in the 2nd quarter of 2018 as compared to the 1st quarter of 2018. Volatility, as measured by the CBOE VIX Index (VIX), averaged 2 points less (15.33 vs 17.35) and had a significantly narrower range (11.98 points vs 28.17 points). However, that is not to say that the 2nd quarter was uneventful or without drama. There was a distinct escalation in trade war jargon, rocky Brexit negotiations, Elon Musk taunting short sellers, the vilification of Harley Davidson by the President, NATO bashing, immigration controversy in the U.S. and Europe, oil rallying on continued OPEC cooperation and emerging markets and Chinese equities showing decided weakness.
The wild ride in cryptocurrencies seemed to moderate, if one could call it a moderation. Bitcoin fell -13.91% in the quarter and experienced an annualized standard deviation of returns of 62% as compared to an annualized standard deviation of 103% in the 1st quarter of 2018 (see Figure 1). The cryptocurrency market continues to be hampered by high profile hacks at various cryptocurrency exchanges. The latest, Coinrail of South Korea, had 30% of its virtual currencies stolen in June amounting to nearly $40 million. This was not exactly what the sector needed following the largest virtual theft of $530 million from Japan's Coincheck in January 2018. If this market is to move forward and grow, the lack of security will have to be addressed for both investor confidence and regulatory approval.