Bitcoin is Becoming a More Stable Assest Now
According to a report by Fidelity, Bitcoin is experiencing reduced volatility as it progresses into a more mature digital asset. The cryptocurrency's volatility has hit record lows on a yearly basis, as highlighted by Fidelity.
Analyst Zack Wainwright pointed out that new assets typically undergo a phase of price discovery and maturation before stabilizing into lower volatility patterns. This trend is not unique to Bitcoin; even gold experienced high volatility during its early stages after the U.S. abandoned the gold standard in the 1970s.
In its 15-year history, Bitcoin has demonstrated signs of maturation, reflected in its decreasing volatility trends. Fidelity's report suggests a clear downward trajectory in Bitcoin's volatility over time, a trend expected to persist as the cryptocurrency matures further.
Comparatively, Bitcoin is now less volatile than 33 companies in the S&P 500 index, and as recently as October 2023, it was less volatile than 92 stocks within the index based on 90-day realized historical volatility metrics.
Over the past two years, Bitcoin's volatility has been lower than that of Netflix (NFLX), and when assessed against a group of high-performing stocks known as the "magnificent seven," Bitcoin's volatility appears in line with established norms.
The report acknowledges that emerging asset classes with smaller market caps tend to experience higher volatility due to new capital inflows. However, as Bitcoin's market cap grows and the asset class matures, the impact of new capital inflows on volatility is expected to diminish.
While the approval of U.S. spot bitcoin exchange-traded funds (ETFs) and subsequent inflows were anticipated to stabilize Bitcoin's volatility, the cryptocurrency experienced a 16% decline last month. The report notes that as the market grows and matures, new capital inflows are less likely to significantly influence market movements.
