Since the time when cryptocurrencies became known for a wide audience, the issue of their volatility is one of the most discussable topics related to this class of assets. Even those who are not going to invest into Bitcoin have definitely heard from somebody else that this type of investments is extremely risk due to the unbelievable high volatility of Bitcoin. But is it really true?
Cryptocurrency vs. Stocks
Despite a widely spread opinion, now the volatility of Bitcoin is lower than this indicator related to some of the biggest and most popular stocks on Wall Street, including the stocks of such tech giants as Amazon, Netflix, and chipmaking firm Nvidia.
Such a conclusion can be made on base of the data provided by Cboe Global Markets. According to the experts’ report, the 20-day historical volatility (HV), which is the rate of change in Bitcoin daily price, has dropped and equals to 31.5%.
At the same time, Amazon has a 20-day HV of 35 percent, Nvidia’s HV stands at 40 percent, and Netflix’s indicator is 52 percent. It’s worth mentioning that at the current moment, Bitcoin is practically as stable as Apple (AAPL) that is considered to be the most valuable company in the world. With a market cap of nearly $1 trillion, Apple has a 20-day HV of 29.3 percent.
Commenting the situation that can be currently observed at the market, Kevin Davitt, a senior instructor at The Options Institute at Cboe, explained:
“A one standard deviation move for bitcoin at present is about $475. That works out to +/- 7.3 percent (475/6500). Compare that to earlier this year (mid-January) when bitcoin was around $11,000. Back then, standard deviation measured $4,640 or +/- 42 percent.”
When Bitcoin was losing its value after it had reached its record level of roughly $20,000 in December 2017, its 20-day HV reached 140 percent and even such figures are rather low if we compare them to Tilray Inc.’s indicators.
This Vancouver-based cannabis company went public last July. At that time its stocks were traded for roughly $17 per share, nevertheless, later the price jumped to $300. According to the data provided by Cboe, the present Tilray’s 20-day HV stands at 219 percent.
As for the situation with Bitcoin, there is no any concrete opinion, nevertheless, Davitt said it may be a good sign:
“Perhaps we are witnessing the maturation of a market. It’s far too early to declare this the ‘new normal,’ but the persistent range over the last few weeks may be hinting at a structural shift. Time will tell.”
Bitcoin Price Influence
The world’s cryptocurrency No.1 is still rather far away from its record value. At the press time, it is traded for $6,465 having lost less than a percent over the last 24 hours.
Though such a situation may seem to be not a very positive one for crypto investors, it has still some benefits. According to experts, stagnant cryptocurrency prices boost business activity. In the context of declining prices, investors have simply shifted their focus from Bitcoin to the companies working in the crypto sphere.