Should we be worried that Bitcoin’s volatility is higher than usual?
Realized volatility is the average fluctuation of a coin’s price in 30 days. Volatility is measured by working out the standard deviation in the price of Bitcoin over time.
In the previous month, the figure achieved 103%, the company’s data showed. It means that in the last 30 days, the price of Bitcoin diverged from its average price by 103%.
Committing to this over the past month are the sudden bursts and troughs of Bitcoin’s price. A significant sell-off last January 11 has caused Bitcoin to suffer its most significant daily price drop, and in the weeks before the Bitcoin hit $41,000, its highest price ever.
Though the volatility figures are the same as those from last March, when Bitcoin crashed once the pandemic started, the main difference is we’re in a bull run.
During bull runs, price fluctuations are more common as investors are cashing out at different points. An analyst from Quantum Economics, Pedro Febrero, said:
“The more volatility the price has, the greater the magnitude of the change in the prices of bitcoin. During bull runs, this is to be expected.”
Notwithstanding Bitcoin’s volatility, it has still outperformed other assets like gold in the previous year.
Additionally, the overall volatility of Bitcoin is going down; as the price and market cap of the cryptocurrency has been increasing over time, the asset’s volatility has then decreased.
And then, over the past year, Bitcoin and other cryptocurrencies are up and performing even better than the traditional investments.
An anonymous investor has tracked ten cryptocurrencies in 2020 and found out that they performed more than eight times better than the US stock market: his $1000 crypto investment grew 139%, while the S&P 500 was up by about 16%.
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