As a seasoned crypto investor with a keen interest in market trends and volatility, I find the recent data on Bitcoin’s (BTC) dropping volatility compared to top tech stocks and many S&P 500 companies quite intriguing. With Bitcoin’s annualized realized volatility at around 44.88%, significantly lower than that of Tesla, Meta, and Nvidia, and even more than 33 of the roughly 500 companies in the S&P 500 index, it appears that Bitcoin is maturing and stabilizing as an asset class.
In the yearly perspective, Bitcoin’s (BTC) price fluctuations have decreased compared to leading tech companies like Tesla, Meta Platforms, and Nvidia, indicating its progression towards a more established and less volatile investment category.
Bitcoin becomes more stable than many S&P 500 stocks
Based on data from May 11, I’ve calculated Bitcoin’s one-year realized volatility to be approximately 44.88%. This figure represents the standard deviation of its returns from the average return of the market. In contrast, the annualized realized volatility for the “magnificent seven” companies including Tesla, Meta Platforms, and Nvidia, exceeded 50% each.
Additionally, according to Fidelity Investments’ recent analysis, Bitcoin exhibits less price instability than around 33 out of the approximately 500 firms listed in the S&P 500 index.
Notably:
“Bitcoin was actually less volatile than 92 of the S&P 500 stocks in October of 2023 when using the 90-day realized historical volatility figures. Some of these names are also large-cap and mega-cap stocks.”
Bitcoin mirroring gold volatility patterns
In Bitcoin’s early stages, the annualized volatility exceeded 200% – a common trait for emerging asset classes receiving substantial new investments. This high volatility occurred due to these inflows comprising a relatively minor portion of the overall financial resources involved.
As a researcher studying market trends, I’ve discovered that new investments have a diminishing impact on market prices and the actions of marginal buyers and sellers. This phenomenon is evident in Bitcoin’s long-term price volatility chart, which demonstrates a gradual reduction in volatility over time. The regression line in this chart shows a clear downward slope.
As a researcher studying the financial markets, I have observed an intriguing similarity between Bitcoin’s recent price fluctuations and those of gold during its early trading years. Both assets underwent a significant period of price discovery, characterized by high volatility at the outset. Over time, as the market for these assets evolved and matured, this volatility gradually decreased.
Inflation caused gold prices to skyrocket following its separation from the U.S. dollar’s peg in 1971 and the ensuing authorization of personal gold ownership in 1974. Consequently, gold’s price instability exceeded 80% during the early 1970s – nearly doubling Bitcoin’s volatility recorded in April 2024.
As a crypto investor, I’ve noticed that just like gold, the price swings of Bitcoin have started to narrow down. This observation implies that Bitcoin might be evolving into a more stable investment option as it gains greater acceptance and integration within the financial sector.
As a researcher studying cryptocurrencies, I’ve noticed a significant difference in Bitcoin’s volatility over the past few years. Specifically, I found that the annualized volatility was approximately 44% when the price reached new highs above $60,000. This is notably less than what we observed three years ago when the price hovered around the same level, which saw an annualized volatility of around 80%.
As a crypto investor, I’ve noticed a significant shift in sentiment recently. This could indicate that Bitcoin is entering a new stage of development, fueled even more by the groundbreaking approval of various spot Bitcoin ETPs (Exchange-Traded Products) in the United States.
“Bitcoin was nearly half as volatile in 2024 at $60,000 when compared with 2021. When putting this all together, a thesis pointing toward a growing acceptance of Bitcoin due to potential maturation begins to emerge.”
Major BTC price jump ahead?
As a researcher studying Bitcoin’s market behavior, I’ve observed an intriguing pattern: extended periods of lower annualized realized volatility have historically been followed by significant price increases. Essentially, this suggests that investor sentiment, both among existing and new Bitcoin holders, becomes more bullish when the price becomes relatively stable.
The volatility of Bitcoin over the past year reached approximately 43% in December 2023. However, since then, its price has surged roughly 75%. This upward trend can be attributed to the increasing demand for spot Bitcoin Exchange-Traded Funds (ETFs) in the US market. As of May 11, a total of $11.68 billion has been invested in these ETFs.
According to Robert Mitchnick, who leads the digital assets team at BlackRock – the biggest player in the global asset management industry – the upcoming period is expected to witness major institutions such as sovereign wealth funds, pension funds, and endowments interacting with spot Bitcoin Exchange-Traded Funds (ETFs).
Institutionally invested funds generally adhere to rigorous risk control measures. A less volatile asset class offers more consistent and dependable yields, fitting well within their investment objectives.
According to market analyst Scott Melker, it’s crucial to keep in mind that this process requires time. The companies involved are currently conducting thorough investigations, a necessary step before making any significant decisions.
“The massive institutional flood of money that will drive bitcoin to all-time highs.”
Melker expects the BTC price to rise toward $100,000-150,000 range due the anticipated ETF inflows.
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2024-05-11 18:26