Is The Damned Volatility of Bitcoin At Last Decreasing?

Many Bitcoin-critics are arguing with the volatility, that makes impossible for Bitcoin to comply with some basic functions of currency, or money. For example, how can be something, with a wildly fluctuating value, used for savings, it means, store value for the future? You don’t even know what it will be worth in two minutes, let alone in two years!

Mad measurements

Similarly, you can’t measure the value of something with an instrument which has no stable value itself. If you dock a moving ship to another moving ship, you can’t hope they will both stay steady in one place. Some people like risky investments, like cryptocoins today, but most people, don’t. So, this high volatility is clearly the enemy Number One of crypto-adoption and acceptance.

Killing me softly

In the last couple of months, I have had the feeling Bitcoin volatility was going lower, so I made my research, downloading data and drawing some charts. In the last year, the volatility spiked several times above 70, last time in February (see the first chart). But indeed, since February, data are showing a relatively quiet period, despite the price lows this year.

Volatility data are very volatile, noisy, but if we calculate the trend, draw a trendline (the red line), it is slowly decreasing. (Yes, volatility of volatility also exists, for example, the VVIX index by stocks.) So far, so good. Can we stay calm and suppose that the volatility is lowering slowly and this problem will solve itself?

The big boring consolidation

Unfortunately, not. If I draw another chart, this time, of three years, and put again a trendline on it, this time volatility is increasing. (See chart two.) Because in 2015-2016, there was a stagnating, little changing price action of Bitcoin. There was no hype, no panic, not so much media appearance, only a quiet consolidation.

There are other indicators, like maximum drawdown to analyze, but I think that’s enough. If I want, the glass is half full, if I want, the glass is half empty. But there is no major change in volatility this Year, it's still very high. If EUR/USD or USD/GBP were jumping 11 percent in a single day, like Bitcoin yesterday, that would be an apocalypse in the international capital markets. Cryptocurrencies have to calm down, a lot, they are far too volatile yet.

Read my other posts about this theme:
The Shocking Truth About The Mass Adoption
Bitcoin, Fiat, Gold – living happily ever after?
Data and fresh charts on Cryptocompare.com.
An other Bitcoin volatility chart here.
(Photo: Pixabay)

Disclaimer:

I am not a financial advisor and this content in this article is not a financial or investment advice. It is for informative purposes only, or simply to make you think, entertain, increase testosterone and adrenaline level. Consult your advisers before making any decision.

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