Bitcoin has been through a roller coaster of volatility in the last five years. The cryptocurrency market has experienced volatile price fluctuations since its inception. Many investors are asking if Bitcoin is now less volatile than other common stocks, such as the NASDAQ and S&P 500. This article will discuss whether Bitcoin is now less volatile than other common stocks, such as the NASDAQ and S&P 500.
What Does Volatility Mean?
Volatility measures the movement of a security’s price over a period of time. The more a security price moves up and down, the more volatile it is. Investors will generally rely on one of two metrics when determining if a security is deposited. The first is the standard deviation. The second is the actual average range. The standard deviation is a statistical measure of how much the price of a security deviates from its average price. The average range is like the standard deviation but includes the dividends paid over the same period. While some people prefer one metric over the other, many investors will use a combination of the two when measuring volatility.
Bitcoin is Now Less Volatile Than NASDAQ & S&P 500
This can seem like a strange thing to say at first. After all, Bitcoin is still trading more than five times more frequently than the NASDAQ or S&P 500 indices. But looking at daily price volatility alone doesn’t tell us anything. Volatility is a measurement of price fluctuations over time. It’s not a one-off number that you can glance at on a chart and say, “Oh, that looks volatile.” The fact that Bitcoin is now less volatile than the NASDAQ and S&P 500 doesn’t mean it’s suddenly a stable investment. It simply means that it’s less volatile than before. And in many ways, less volatility is merely a sign of Bitcoin’s growing maturity. As the crypto asset class enters the mainstream and exchanges become more regulated, we’ll likely see price fluctuations become less dramatic. But it should be remembered that a reduction in volatility is not the same as an increase in stability. A single, dramatic price movement could easily wipe out any gains from a more stable, low-parity market.
Why is Bitcoin Less Volatile Now?
If Bitcoin is less volatile than before, why are its price movements still being measured relative to the NASDAQ and S&P 500? The answer is that Bitcoin’s price oscillates far more frequently than those of more established asset classes. In many ways, this jump in price variability is natural. As a new asset class, cryptocurrencies are still shaking off the dust of obscurity and establishing themselves as viable investment option. Moreover, Bitcoin and other cryptocurrencies are being traded in a market still in its infancy. Many exchanges are unregulated, and security is patchy at best. At this stage in the game, price volatility is expected. It would be worrying if Bitcoin weren’t experiencing such wild swings in price. It signifies healthy demand and a growing interest in cryptocurrencies as an asset class.
How Has the Volatility of Bitcoin Changed Over Time?
Bitcoin is a relatively new asset, so its volatility has decreased steadily over time. When Bitcoin was first created, it was highly volatile, with volatility that was comparable to that of the S&P 500. Over the years, the volatility of Bitcoin has steadily decreased, eventually becoming less volatile than the NASDAQ and S&P 500. The volatility of Bitcoin has dropped so much recently that it is now less volatile than the NASDAQ and S&P 500. The recent drop in volatility in the crypto market could be due to various factors. Investors are becoming increasingly comfortable with the crypto market and its risk, thus leading to less dramatic price swings.
Is Bitcoin Likely to Remain Less Volatile than NASDAQ and S&P 500?
Volatility is an important metric to keep in mind when investing in Bitcoin. While Bitcoin has been less volatile than the NASDAQ and S&P 500 for years, it is likely that this trend will only continue for a while. Therefore, it is not possible to say whether Bitcoin will remain less volatile than the NASDAQ and S&P 500. However, if history is any indication, the volatility of Bitcoin will likely increase from its current level. Whenever there is a dramatic change in the price of Bitcoin, there is often a corresponding increase in volatility. Because Bitcoin is new and developing, it is impossible to predict its future price movements. Because of this, Bitcoin is a hazardous investment. It's important to understand that even though Bitcoin is less volatile than other indices now, this may be the case for a while.
Is Bitcoin Still Non- Correlated to NASDAQ and S&P 500
In 2009, the United States economy was in the worst recession since the Great Depression. The country’s stock market, NASDAQ, and S&P 500 were in freefall. Bitcoin was also a new phenomenon at that time. Therefore, it is unsurprising that bitcoin's price declined along with other traditional assets during the crisis. However, bitcoin's price currently does seem to correlate to the NASDAQ and S&P 500 today. This means that bitcoin is correlated to the general stock market. This may seem counterintuitive as there is no fundamental relationship between them. If you are interested in trading cryptocurrencies like Bitcoin, Ethereum, Solana, etc., take your time, do your homework, invest periodically, and most importantly, give your investment positions the benefit of time to produce the results you would like to see. Three to five years would be a good horizon. Welcome to the new digital age.