Bitcoin’s volatility trend shows signs of stabilization in 2024
High volatility creates short-term uncertainty across crypto markets, which can lead to temporary losses, triggering panic selling. For instance, bitcoin’s recent crash from a price of more than $65,000 on August 1 down to under $54,000 a week later (a price that is slowly climbing back up ever since) was primarily influenced by fears of a global recession, factors not directly related to bitcoin itself. For businesses, volatility complicates pricing strategies. For consumers, it reduces bitcoin’s appeal as a medium of exchange. Regulators worry about the potential destabilization of related markets, even during overall upward trends.
When analyzing annual volatility metrics, how much an asset’s price is expected to fluctuate over a year, based on its daily price movements, it becomes clear that bitcoin has more volatility (including more upside potential) than any other asset on the market today. For example, a 20% annual volatility suggests the asset’s price might move up or down by about 20% within a year.
Bitcoin’s
Bitcoin
Bitcoin’s 10-Year Volatility Far Exceeds Traditional Assets
Bitcoin has more volatility than other analyzed assets
Traditional financial companies, such as Visa (13.81%) and JPMorgan Chase (14.98%), show about three times less volatility over 10 years than bitcoin.
There are assets where the difference is less pronounced: bitcoin’s volatility is 1.4 times higher than Tesla’s (32.30%), 1.7 times higher than NVIDIA’s (27.67%), and 1.8 times higher than WTI oil (25.66%).
Bitcoin’s Volatility Is Declining in 2024
Bitcoin’s volatility gap narrows with tech stocks over one year.
Over the last 12 months, bitcoin’s average annual volatility stood at 35.48%. While this still exceeds the volatility of all other assets analyzed, the gap has noticeably narrowed compared to the 10-year period.
Bitcoin remains 4.5 times more volatile than the S&P 500 (7.88%) and four times more volatile than gold (8.92%). This indicates a slight convergence with traditional safe-haven assets, though the difference remains substantial.
The gap with the tech sector has decreased more significantly, showing varied dynamics across different companies. Bitcoin’s volatility is now 2.5 times higher than that of Apple stock (13.97%).
However, the most notable changes occurred when comparing bitcoin to high-volatility tech assets. The difference between bitcoin and companies like Tesla and NVIDIA has become minimal. Bitcoin’s average annual volatility is only 1.09 times higher than Tesla’s (32.54%) and 1.17 times higher than NVIDIA’s (30.42%).
This trend suggests that bitcoin, while still a volatile asset, is behaving more like other high-risk investments, particularly tech stocks. It may indicate bitcoin’s growing integration into a broader range of investment instruments and its gradual perception by investors as a more mainstream, albeit still risky, asset.
The most recent data reveals that bitcoin’s volatility has dipped below that of Intel, Tesla, and NVIDIA over the past few months. While this short timeframe doesn’t warrant sweeping conclusions, it certainly requires close attention to how this trend will develop in the coming months.
Bitcoin’s volatility dips below tech giants in recent months
However, I want to note that despite bitcoin’s overall decrease in volatility, traditional financial institutions continue to demonstrate greater stability. Bitcoin’s volatility still exceeds that of Visa by 3.7 times and JPMorgan Chase by 3.2 times. This represents a slight increase in the gap compared to the 10-year period, highlighting that while bitcoin is becoming more stable, it hasn’t yet reached the level of established financial giants.
Bitcoin Is Now Comparable To Tech Stocks
Over the past year, bitcoin has shown volatility more comparable to other traditional investments, particularly tech stocks. This trend suggests bitcoin’s growing integration into a broader range of investment portfolios and its gradual acceptance by investors as a more mainstream risky asset.
We may be witnessing a turning point in bitcoin’s history. Although this review doesn’t examine bitcoin’s correlation with other assets during periods of market stress, which could be a critical factor for investors. Overall, 2024 has seen increased trust in bitcoin from regulators and politicians. The approval of bitcoin ETFs in the U.S. and potentially other countries, heightened attention from U.S. presidential candidates, and the legalization of mining in Russia all point to a shifting attitude towards cryptocurrencies at the institutional level. Only time will tell how bitcoin’s volatility continues to evolve as adoption increases.