• This article discusses the volatility of Bitcoin and its lack of improvement over time.
• It examines data from 2020, 2021 and 2022 to track Bitcoin’s volatility using a 30-Day window.
• The conclusion is that while there have been improvements since 2015, the situation has not improved much in recent years.
Bitcoin Volatility
Bitcoin and volatility are closely related, with fluctuations in price an inevitable part of cryptocurrency markets. In this article we will look at whether Bitcoin’s volatility is improving over time or if it has remained stable.
Data Analysis
To assess whether Bitcoin’s volatility is coming down, we examined the annualised mark over a rolling 30-Day window. The chart shows two things: firstly, that Bitcoin was highly volatile until 2015; secondly, that since then it appears to have calmed down slightly in the latter half of 2021, 2022 and start of 2023.
Comparison to Other Assets
In comparing Bitcoin’s returns to those of the Nasdaq and individual stocks, it was found that its average weekly return was 26X greater than the euro last year – up from 19X in 2021 and 16X in 2020. This suggests that although there may have been some improvements over time, overall Bitcoin remains extremely volatile compared to other assets.
Risk Management Challenges
The high level of volatility presents challenges for risk management as well as creating difficulties for institutional investors looking to allocate capital into cryptocurrencies. As such, it could be argued that reducing Bitcoin’s volatility should be a priority for industry stakeholders if they wish to see more widespread adoption in the future.
Conclusion
In conclusion, while there have been improvements since 2015 it appears that overall Bitcoin’s volatility has not decreased significantly in recent years. This presents challenges for risk management as well as making it harder for institutional investors to allocate capital into cryptocurrencies – something which needs to be addressed if wider adoption is desired by industry stakeholders.
