A Brief History of Bitcoin Volatility, 2009–2019
Bitcoin Volatility is some of the lowest we’ve seen in a long time.
In a statement made by Tim Enneking, Managing Director of Digital Capital Management, to Forbes in September, he asserted that the price of bitcoin is the lowest its been for some time. His statement was said to be predictive because two weeks later, Bitcoin fell by 20%, which despite the decline it is nothing compared to the tumultuous past of Bitcoin.
Lets define volatility and provide a little chronology of the volatility of the cryptocurrency shining star.
Volatility is the range of price change security experiences over a given period of time. If the price stays relatively stable, the security has low volatility. A highly volatile security hits new highs and lows quickly, moves erratically, and has rapid increases and dramatic falls.
With this definition in mind, the first purchase of Bitcoin in dollars was made by an individual using the name NewLibertyStandard. What a deal! He had, using PayPal, more than 5 Bitcoin with only 5 dollars.
Just after the birth of the bitcoin-dollar exchange, the price moved more than 50 percent in a day! Then it went from $1,000 in 2013 to $200 in 2015 to nearly $20,000 in 2017 and back down under $4,000 in 2018.
Although this suggests that the Bitcoin price is not making any progress in terms of price stability, an analysis of the daily percent price changes present a completely different conclusion.
Indeed, using a method comparable to the study of seismic tremors, Chris Burniske highlights the decrease in the importance of daily price variations.
Does this encouraging analysis on price stability combined with a day-by-day increase in the total market cap allow us to hope for the end of the wild days of bitcoin?
However, other technical indicators predict a return to high volatility in the very near future.
This indicator comes from the analysis of the envelope trading.
An envelope’s upper and lower bands are typically generated by a simple moving average and a predetermined distance above and below the moving average — but can be created using any number of other techniques. Investopedia.
It turns out that, for Bitcoin, the difference between the low and high bands is at its lowest since mid-September. And for Bloomberg, this bodes well for an imminent period of dramatic price fluctuations.
Josh Rager, Co-founder of Blockroots.com, makes the same predictions.
In addition, the recent negative information about Libra project could cause volatility to move in the same direction.
Matt Maley from Miller Tabk+Co said to Bloomberg:
“As it becomes more and more obvious that the Libra thing is not going to take off — it’s going to be a long time before it becomes an important part of anything Facebook’s doing — as that becomes more obvious, the volatility will pick up again.”
After the letter sent by two senators to the Libra Ship’s biggest companies, which led to the departure of its biggest sailors (Visa, MasterCard, Booking.com), it is now up to the fed’s turn to express their pessimism about the general adoption of Libra. Federal reserve governor Lael Brainard states:
“Global stablecoin networks should be expected to meet a high threshold of legal and regulatory safeguards before launching operations.”
Will Libra’s upcoming potential regulatory debacles have dramatic repercussions on Bitcoin volatility? What do you think?