Bitcoin is becoming less and less volatile, a sign of increasing maturity. Subject to significant price variations, Bitcoin has seen its average volatility over 60 days decrease significantly, despite a substantial increase in its value for more than a year.
Bitcoin loses volatility and gains maturity
One of the main arguments put forward by detractors of Bitcoin, claiming that it is not a currency, is its high volatility. Indeed, Bitcoin is known for its significant price fluctuations, being able to lose or gain 5% of its value in a day and up to 80% in a few months.
Such uncertainty regarding variations in the value of BTC in the short term would prevent its users from relying on this currency to make their daily purchases. However, unlike its capitalization, Bitcoin's volatility has decreased significantly over time.
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According to a study by Kaiko Research, although the price of Bitcoin increased from $17,000 at the start of 2023 to more than $73,000 in March 2024, an increase of 330%, its 60-day average volatility has never been lower over such a long period.
60-day average of Bitcoin volatility
For information, the 2 main periods of high volatility of BTC were caused by the Covid-19 crisis in 2020 and by the fall of the Terra ecosystem, followed by the bankruptcy of FTX in 2022. We could therefore think that volatility increases mainly when the price is in a sharp decline, while its volatility had also reached a peak of 106% during its 2021 peak at $69,000.
Kaiko Research nevertheless points out that it is too early to consider this trend definitive. Indeed, it is impossible to determine whether Bitcoin will repeat its volatility spikes in the future. However, these figures show that BTC has gained maturity, which proves its investors right and still leaves it the possibility of becoming an everyday currency.
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Why is Bitcoin volatility decreasing?
The drop in BTC volatility is not that surprising. The volatility of the value of a currency lies above all in its trading volume and its capitalization. The more a currency is capitalized and traded, the less volatile it is.
For example, gold, with a capitalization of almost $16 trillion, has much lower volatility than Bitcoin. This is explained by the fact that much larger funds are required, as well as significant volumes of purchases or sales, to cause its price to fluctuate..
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The same goes for fiat currencies. With 15.1 trillion euros and 20.9 trillion dollars in circulation, these currencies are traded much more frequently than goldwhich also makes them less volatile.
With a capitalization of 1,300 billion dollars and much less frequent exchanges than other currencies, Bitcoin is therefore much more volatile. Arguing that BTC cannot be a currency because of its volatility is an argument based on a misunderstanding of how currencies work. In reality, it is by adopting, owning and trading BTC that it will become less volatile.
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