Forget What You’ve Heard: As Bitcoin’s Value Has Risen, Volatility Has Declined

There seems to be an inverse relationship between bitcoin’s price and volatility. The cryptocurrency’s liability to change rapidly and unpredictably is still present, but the magnitude of the changes has declined significantly over the years, challenging some of the basic assumptions of critics who believe bitcoin can never become a true store of value.

Declining Volatility

Cryptocurrency analyst The Rhythm Trader recently showed the relationship between bitcoin’s price and its yearly volatility. As the following tweet illustrates, bitcoin’s rising value over the years has been accompanied by a sharp decline in unpredictable price swings.

Hacked drew attention to bitcoin’s progressively higher yearly bottoms in a January 16 article that evaluated whether 2019 will be the cryptocurrency’s year of accumulation. But the second half of The Rhythm Trader’s tweet took us by surprise initially. Then we thought about it more and realized it made perfect sense.

Research from Long Hash back in January revealed that bitcoin’s volatility has been in retreat for the duration of its ten-year history. Once again, this doesn’t mean bitcoin isn’t volatile – it just means the magnitude of the fluctuations has been in decline.

“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,” Kyle Torpey wrote.

This trend is highlighted in the following chart courtesy of Buy Bitcoin Worldwide, which shows BTC’s volatility time series stretching back to 2010. The chart, which captures bitcoin’s 30-day volatility, shows a significant drop in the latter years.

Bitcoin Volatility Index
The magnitude of bitcoin’s price changes has declined over the years. | Source: Buy Bitcoin Worldwide.

An almost identical trend is identified by, a volatility data provider that Hacked regularly uses.

Bitcoin Volatility Index
Another look at bitcoin volatility over the years. | Source:

For cryptocurrency traders, volatility is a double-edged sword. It makes declines like the one we saw in November all the more possible, but also allows prices to quickly recover as they’ve done over the past three months.

BTC/USD Update

Bitcoin’s price action continued to narrow on Wednesday, as markets consolidated following the latest recovery attempt. At the time of writing, the BTC/USD exchange rate was trading at $7,824.02 on Bitstamp, where it was down 1.7%.

The daily chart shows favorable conditions as far as technical indicators go. Bitcoin remains in a heavy accumulation phase with strong underlying momentum via the RSI. Price action is strong, with the 200-day moving average appearing as a distant memory.

Bitcoin Price
The bitcoin price (BTC/USD) is struggling to hold $8,000 after fast recovery. | Source: TradingView.

For the bulls to capture new highs, they must break above the $8,200-$8,300 range. This has proven difficult before. Beyond that level, a fast pump targeting $9,000 and eventually $9,600 is certainly possible in the short term. Read more: Crypto Markets are Surging Again after “Jackass” Whale Dump; Will Bitcoin Eye $9,600?

At current values, bitcoin has a total capitalization of around $139 billion, accounting for 56.5% of the total cryptocurrency market. Bitcoin’s so-called dominance rate peaked above 60% earlier this month for the first time since 2016.

The overall crypto market cap is hovering just above $246 billion. Most of the top coins were in a minor retreat on Wednesday, with Binance Coin (BNB) being the notable exception.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. Chart via TradingView. 

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi