Data Shows Bitcoin’s Price Volatility Has Been Declining Over Its 10 Year History

By Kyle Torpey

One of the main criticisms of Bitcoin — in addition to the generally poor user experience that still plagues wallet software — has to do with its volatile price movements. Although the perception of the digital asset has evolved from cryptocurrency to crypto asset over the past couple of years, there are still those who say Bitcoin will never become a popular medium of exchange due to wild price swings that can move the price 10% or more in a single day.


While it’s certainly fair to criticize Bitcoin’s lack of price stability, the history of the digital asset shows a gradual decline in volatility.


Bitcoin’s Volatile November Was Nothing in a Historical Context


There was quite a bit of media hysteria around Bitcoin’s sharp price drop in November when it fell around 43.5% in a span of eleven days. And rightfully so. This was a severe, sudden, and mostly unexpected movement in the price.


However, November as a whole doesn’t look all that volatile when compared with the rest of Bitcoin’s price history.


According to Buy Bitcoin Worldwide’s Bitcoin Volatility Index, the peak volatility (measured as the 30-day standard deviation of daily returns) around this time period was 5.56% on December 10th. For context, Bitcoin’s price volatility was also around this level or higher for the vast majority of 2017’s epic bull run.


Even earlier in Bitcoin’s history, volatility levels tended to be higher. Prior to 2014, a price volatility of 10% was rather common. In 2011, volatility routinely breached 10% and once even pushed past 15%.


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Comparing Bear Markets


The last time Bitcoin was this volatile was around the same point in the previous bear market. In fact, the bear market that started with the price crash in late 2013 was eerily similar to what is happening today — at least so far. However, the volatility in that previous bear market was much worse.


While volatility during the late 2017 price crash peaked at around 7.71%, the crash of late 2013 saw a peak of 12.57%. During that earlier crash, volatility also popped above 7% on two more occasions during the ensuing bear market before eventually arriving at the most stable stretch in Bitcoin’s history from February 2015 to December 2017 (in terms of staying below 5% volatility).


Based on this data from Bitcoin’s previous bear market compared with what has been seen in the current one, it’s possible that Bitcoin may be in for a boring 2019 in terms of price movements.


Comparisons with Traditional Markets


Bitcoin’s move towards a more stable store of value is perhaps most obvious during the brief periods of time when it has been more stable than traditional assets.


Bitcoin’s price first became more stable than gold for a brief period of time in May and June of 2012, and it has achieved this feat on multiple other occasions since then. It appeared Bitcoin was destined to become more stable than gold again before November’s sudden price drop. Looking at the historical data, a wild swing in the price seems to be right around the corner whenever Bitcoin approaches gold-level price stability.


Bitcoin was also more stable than the S&P 500, NASDAQ, and DOW for a 30-day period last fall.


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