Bitcoin Volatility at Levels Not Seen Since Early 2018

By Kyle Torpey

If Bitcoin is supposed to be a currency, then it shouldn't be so volatile, right? That's the question asked by many skeptics who still think of the digital asset as a joke.

While Bitcoin's volatility has mostly been on the decline since it was launched back in January 2009, the cryptocurrency has been lacking stability in 2019. According to Coin Metrics, Bitcoin's 60-day volatility of daily returns is currently at levels not seen since early 2018, when a massive bubble in crypto asset market was deflating rather quickly.

July 7, 2019's 60-day Bitcoin daily return volatility of 5.4% is also only slightly higher than what was seen in the aftermath of the sharp decline in the Bitcoin price back in November of last year. Of course, the cryptocurrency's volatility has sent the price in the opposite direction so far in 2019.

Bitcoin's Volatile 2019

Bitcoin has been volatile in an upwards direction this year, with its price up more than 200% against the U.S. dollar.

Bitcoin Volatility vs U.S. Dollar_en.png

There are a number of different theories as to why volatility has returned to Bitcoin in 2019. As Circle CEO Jeremy Allaire pointed out in a recent interview, many long term holders of Bitcoin who are convinced in the asset's future potential started accumulating Bitcoin as the price bottomed out in late 2018. This phenomenon was also covered in reports from Adamant Capital and Delphi Digital earlier this year.

Additionally, a new research note from crypto prime dealer SFOX points to a correlation between Bitcoin price increases and holidays. Specifically, the SFOX research team points to this year's Spring Festival in China as an example of potential FOMO (fear of missing out) buying action during a holiday season.

Many believe that the sharp increase in the Bitcoin price in June was due to the excitement around Facebook's Libra cryptocurrency announcement. Some of the speakers at the recent Bitcoin 2019 conference in San Francisco even speculated on the roundabout ways the Libra project could help Bitcoin.

More recently, Blockchain Capital's Spencer Bogart spoke about Bitcoin's recent volatility as a normal consequence of being a relatively new asset that has a fixed supply with fluctuating demand during an interview with Bloomberg.

What About Altcoin Volatility?

While highly correlated with Bitcoin at the start of the year, altcoins have tended to be more volatile than the world's first and most popular cryptocurrency throughout the market's history. Having said that, Bitcoin's most recent price run left altcoins behind, which led to a decrease in the relative volatility of altcoins compared to Bitcoin.

In fact, Ether's 60-day volatility is currently lower than Bitcoin's, according to Coin Metrics. This is the first time this has happened since April 2018.

In these early stages of Bitcoin's potential development as a global, apolitical money, the long-term price trends are more relevant than what's happening over the short term. As Bitcoin gains in value and becomes more liquid, the theory is that it will become a more usable medium of exchange because it will be more difficult for whales to push the price around with a single trade.

For now at least, most Bitcoin holders seem fine with the asset's volatility, as long as that volatility sends the price in the right direction.

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