Opinion: Volatility lowest since January, but until it drops further, Bitcoin serves no purpose

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  • Bitcoin’s volatility is a big problem, writes our head of research Dan Ashmore
  • Volatility is the lowest it’s been since January, but that doesn’t offer much consolation regarding bitcoin’s actual utility.
  • For bitcoin to deliver on its potential, it needs to be boring, With volatility close to gold’s famously stable return profile

it is relatively quiet Bitcoin market now, but it won’t last long. And this is a big problem.

First, let us look at short term volatility, as I have seen over the past few days it has eased a bit. Plotting the 1-month volatility on a yearly basis, we are at the lowest mark since January, when this short bitcoin boom kicked off.

It’s a good thing.

But don’t confuse it with a stable market. Crypto markets remain highly temperamental and are capable of swinging back and forth and at eye-watering speeds. Volatility is still close to 50%, which is truly insane in any regular market context.

Perhaps this is better visualized by plotting the daily returns of bitcoin against Tesla. Tesla is about the most extreme member of the S&P 500, with its share price more volatile than its CEO’s Twitter feed. Comparing your volatility to Tesla is like comparing your ability to run a football team to Todd Bohli (seriously, wtf).

And yet, bitcoin’s daily price changes not only match Tesla’s, but typically exceed it.

In fact, if we plot bitcoin’s volatility back over a longer period, we see that these bearish periods do occur, but rarely last long. Bitcoin and volatility are clearly like Frank Lampard and Chelsea – sometimes apart, but you know before long, they’ll be back. And they’re terrible for each other.

Make no mistake about it, volatility is one of bitcoin’s biggest drawbacks. It’s hard to imagine that when assets go back and forth like that, they’ll ever achieve anything close to store-of-value status.

If the end vision for bitcoin is some sort of digital gold, it has a long way to go. The former is more apt to compare Tesla to gold, and highlights the gap between the two assets:

Obviously, this may all change in the future. I don’t have a crystal ball. Regarding the ultimate vision of bitcoin, it simply has to do with, as it currently stands, bitcoin is achieving nothing.

The arguments usually point towards the developing world. He argues that bitcoin can provide a great place to store one’s financial assets. Once again, this may prove to be true over time, but even a declining currency like the Argentine peso is not as volatile as bitcoin. Slow declines such as the peso (and I am using slow a bit liberally there, admittedly) are at least easier to plan for than bitcoin, which can literally drop 20% in the space of a few minutes. .

While bitcoin has been able to handle these massive price changes, it is in no position to help anyone. This argument holds better for stablecoins currently pegged to fiat currencies like the US dollar, which can be equally accessible, but do not swing in price (at least, not judiciously designed ones). ). Now, their flaws could fill a whole new article that I won’t get into here, but the point is this: Bitcoin is virtually worthless while its volatility is as high as it currently is.

My friends often make fun of me for talking about gold, or doing analytical work on its price drivers. boomer, they call me. And justified – gold is boring as fuck, and watching its price charts is like watching paint dry. But it’s kind of a thing, isn’t it? Gold is a store of value, and therefore Robinhood investors should not print out all the hyped gains and losses. Otherwise, it would not be doing its job.

Bitcoin is the same. it needs to take a leaf out of the book of gold and become boring. Until that happens, this mythical property has little meaning beyond wild speculation.

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