Volatility is a measure of how rapidly and unpredictably change occurs, a risk assessment. By comparison with other assets, such as gold (1.2%) and the dollar (1.8%), Bitcoin (3.13%; 30-day est.) is a risky investment indeed. That being said, what is interesting is the change to Bitcoin’s volatility over time.
In the early days, while Bitcoin was just beginning to gain traction, it was difficult to assign meaningful numbers to its volatility since the prices fluctuated so drastically but the absolute values were so low. Bitcoin could have gone from $0.000125 to $0.000190 in one day but that 65% rise in valuation did really amount to much. But, remember the fall of 2017 when Bitcoin’s price soared to $19,500? The volatility index was hitting values of 7.5% and 8.0%. Since then we watched as Bitcoin’s value returned to earthly amounts like $4500 and $3800.
Now, Bitcoin’s price is steadily rising again ($10,350 as of 9/11/2019). Meanwhile, Bitcoin’s volatility index continues to fall. This is a good thing. If Bitcoin is to be the asset class of world finance, the volatilty index has to be equal or less than that of gold today. It looks like we’re going that way.
Bitcoin has been remarkably quiet the last couple of days, settling down to $5750. It’s easy to forget that Bitcoin was as low as $3000 on September 15th just 43 days ago. It was also at an all-time high of $6137 one week ago today. That’s been a wild ride nobody quite expected to happen, so suddenly, so fast. Movement seems to come in waves. With rumors from China, pronouncements from Russia and a few bitcoin blockchain forks, past, present, and future, its no wonder there have been sweeping changes in attitudes. A few days or weeks even, of quietude might not be such a bad thing. It’s no wonder, new owners of bitcoin and owners who suddenly find themselves onto an investment so volatile as bitcoin are beginning to take stock of themselves and their property. Those who have been watching bitcoin but have chosen to not enter the fray as of yet, also take pause.
Either bitcoin is going higher or bitcoin is fizzling out and diminishing to zero. I don’t see the latter happening. There’s just too many good reasons for it to continue and grow. The only question is whether it will trace a hockey stick chart, launching into the stratosphere sometime soon or going up in a relatively straight line. Since it hasn’t done anything in the straight line, I’m guessing the hockey stick approach. Over the past year bitcoin has risen steadily but sometimes explosively four or five weeks in a row, then retraces it’s steps for a week or two, and then begins moving higher again. IF the pattern continues, we should see bitcoin in a holding pattern for the next couple of weeks.