Over the course of the year, Bitcoin (BTC)’s volatility has fallen below that of top technology stocks, including Tesla, Meta, and Nvidia, indicating it is growing into a more mature and stable asset class.
Bitcoin is more stable than many S&P 500 stocks.
As of May 11, Bitcoin’s one-year realized volatility, which measures the standard deviation of returns relative to the market average return, was approximately 44.88%. In comparison, the annual realized volatility of ‘Magnificent 7’ stocks such as Tesla, Meta, and NVIDIA was over 50%.
Moreover, Bitcoin has shown relatively low volatility compared to 33 of the roughly 500 companies in the S&P 500 index, Fidelity Investment said in its latest report.
especially:
“Using 90-day realized historical volatility figures, Bitcoin was actually less volatile than 92 of the S&P 500 stocks in October 2023. Some of these names are also large-cap and mega-cap stocks.”
Bitcoin Mirroring Gold Volatility Pattern
Bitcoin’s initial annual volatility exceeded 200%, a trend typically seen in new asset classes with greater capital inflows. This is because these inflows constitute a smaller percentage of the total capital base.
As a result, as illustrated in Bitcoin’s long-term volatility chart below, new investments are unlikely to significantly affect the market price or the decisions of marginal buyers and sellers, with volatility gradually stabilizing over time through a downward regression line. It shows what happens.
Bitcoin’s recent volatility pattern is very similar to gold’s volatility pattern during the early days of trading. Like gold, Bitcoin also went through a period of price discovery, with high volatility initially but gradually subsiding as the market matured.
Gold prices soared due to inflation following its separation from the U.S. dollar in 1971 and the legalization of private ownership in 1974. As a result, the volatility of precious metals exceeded 80 in the early 1970s. This is almost double the amount of Bitcoin in April 2024.
However, as gold has become an established asset class with a more stable price range, volatility has decreased. These similarities suggest that Bitcoin, like gold, is transitioning into a more stable asset class as it becomes better integrated into the broader financial landscape.
Related: Bitcoin Overtakes Gold in Investor Portfolio Allocation — JPMorgan
One key piece of evidence comes from comparing Bitcoin’s annual volatility of about 44% when its current peak price was above $60,000 to about 80% three years ago when the price was at about the same level.
“This could signal a growing belief that Bitcoin is maturing, further accelerated by the groundbreaking approval of several spot Bitcoin exchange-traded products in the U.S.,” added Fidelity researcher Zack Wainwright.
“Bitcoin was almost halved to $60,000 in 2024 compared to 2021. When you put all this together, the argument begins to emerge that Bitcoin’s acceptance is increasing due to its potential maturity.”
Will major BTC prices jump in the future?
Interestingly, periods of lower annual Bitcoin realized volatility were preceded by large price increases. In other words, when prices stabilize, accumulation sentiment among existing and new Bitcoin investors tends to increase.
Bitcoin’s one-year volatility was approximately 43% as of December 2023. Since then, the price of Bitcoin has risen about 75%, further helped by demand for spot Bitcoin ETFs in the United States. As of May 11, these ETFs had accumulated a total of $11.68 billion.
Robert Mitchnick, head of digital assets at BlackRock, the world’s largest asset management firm. note In the coming months, we will see major players such as sovereign wealth funds, pension funds, and endowments participating in spot Bitcoin ETFs.
Institutional investors typically have strict risk management protocols. The lower the volatility of an asset class, the more predictable and stable the returns, which better align with your investment strategy.
Related: 39% of Canadian institutional investors have exposure to cryptocurrencies: KPMG
“It’s very important to remember that it takes time. “These companies are just starting to do their due diligence.” Independent Market Analyst Scott Melker assertaddition:
“A massive flood of institutional money that will push Bitcoin to all-time highs.”
Melker expects expected ETF inflows to push BTC prices into the $100,000-150,000 range.
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.