The volatility of the pioneering cryptocurrency has gone from 25% at the beginning of the year to 8% today. Bitcoin’s volatility highs of 101% and 74% in 2011 and 2013 did not repeat in 2017.
Bitcoin has been following a decreasing trend for ten years, according to an analysis of its price and the evolution of its volatility. In the bullish cycles of 2011 and 2013, the volatility highs of the first cryptocurrency were near or above 100%. However, renowned analyst Willy Woo says that its volatility is currently below 10%.
In April, US bank JPMorgan sent a communication about this decrease in the volatility of Bitcoin to its customers. They said that it would be improving the perception of Bitcoin in preparation for institutional investors.
Bitcoin’s volatility has often been against its narrative as a store of value or as a hedge against inflation.
For example, there has been a quite noticeable growth in Bitcoin’s volatility from 2010 to the present. It has reached peaks that exceed 100% while the volatility of traditional assets remains in much lower ranges.
Bitcoin’s Sustained Growth Proves that It Is the Best Store of Value
In the last 11 years, the evolution of Bitcoin’s price has responded to a sustained growth, which confirms its attribute as a store of value. There has also been a sustained decrease in volatility when the evolution of volatility has gone through successive upward cycles.
Bitcoin’s volatility reached its all-time high of 101% in June 2011. In April 2013 and December 2013, there were also local volatility peaks above 60%. These increases coincide with respective all-time highs in the price of the pioneering cryptocurrency.
Two other local highs in volatility occurred at the peak of the bullish cycle in 2017 and the low in December 2018. However, the maximum values are increasingly lower, of 39.8% and 38.9%, respectively.
The last two local highs in Bitcoin’s volatility occurred in March 2020, after the markets fell, recording a 28% volatility. In January 2021, Bitcoin’s volatility reached 25% and it has been decreasing this year. At the time of writing this article, the volatility of Bitcoin is 8.11%.
The Volatility of Bitcoin Has Remained Relatively Low
Except for the peaks in 2020, Bitcoin’s volatility during the last twelve months has remained at levels close to or below 10%. Even during a bullish trend, these relatively low volatility levels are reflected in extended periods of lateralization, which are not attractive to traders.
Last year, the explosive development of decentralized finance (DeFi) platforms compensate for that decline in Bitcoin price action.
Concerning assets such as gold and the US dollar against the euro, their volatility remains below 10%.
Even the increase in volatility of Bitcoin has been limited below 30% in the last year, it encourages traders’ bets. However, the trends sometimes change and there are large liquidations.
According to Spanish bitcoiner and financial analyst Manuel Polavieja, “the volatility of Bitcoin is a blessing.” He says that it gives the cryptocurrency publicity, drives its price higher, and stirs up interest in the market.”
By Willmen Blanco