Bitcoin volatility shows not currency or safe haven but speculation
Volatility still very high in bitcoin and crypto currencies (see charts)
Bitcoin fell 25% over weekend; Recent high of $3,000 fell to below $1,900
Bitcoin least volatile of cryptos, around 75% annualised volatility
Gold much more stable at just10% annualised volatility
Bitcoin volatility against USD about 5-7 times vol of traditional forextrading
Cryptos remain subject to huge speculation with little fundamental analysis
Despite major differences many crypto currenciescorrelated, mimic one another
Extreme hype bitcoin expert bets willeat own body part on national television
Millennialscan punt on bitcoin, should also own gold and silver for long term
Cryptos mere ‘babies’ when compared to time tested gold and silver
BTC in US Dollars 1 Year (Source: Coindesk)
Editor: Mark O’Byrne
Crypto volatility and hype shows immaturity remains
The joy about working inprecious metalsis that for part of the weekend you can switch off.
There is a precious time when markets are closed and you don’t have to worry about market movements and what might be happening. You check back in on Sunday afternoon/evening and can delight in the markets starting to wake up for the week ahead. This isn’t the case in cryptocurrencies.
This weekend crypto-currency market participants got a wake-up call as to what24/7/365 markettradingreally means. They watched theprice of bitcoin plummet around 10%on Sunday morning (EST) alone. This contributed to bitcoin’soverall fall of 25%since last Thursday and into the weekend. Other crypto currencies fell by more.
BTC Versus Gold Volatility (Source: Buybitcoinworldwide.com)
Thevolatilityis so bad that if you are one of the few with a bitcoin app that allows you to actually spend your bitcoin then you might have found yourselfpaying for a brunchthat was a hell of a lot more expensive than when you originally sat down to order it. You then might have noticed as you left the cafe that the currency was in full recovery mode and that brunch needn’t have been so expensive after all.
Just over one month agobitcoin was flirting with $3,000, appearing on the front pages of financial magazines and Google saw record searches for ‘Bitcoin.’ On Sunday’s crash the price reached$1,863but as I write this early Thursday morning (BST) it’s at$2,351.
What is this volatility all about and how can cryptocurrency proponents claim that this new money will change the world when its price behaviour can barely manage to guarantee we’ll be able to afford breakfast?
It seems the market cannot decide if this is astore of value or just of little value?
Volatility what does it mean and does it matter?
Bitcoin remains the least volatile of the cryptocurrenciesmainly thanks to its time-served, adoption rates and that it has the highest liquidity. But, we are still talking about a currency which was$600 around a year ago and is now close to $2,400. Even diehard bitcoin fans have to admit that we are in a speculative boom phase. This applies to all cryptocurrencies, not just bitcoin.
If the last two decades have taught us anything about investments it is that speculative boom phases in technology are ones which should beapproached with caution. No one knows what the speculation phase says about future valuations or how the product (and its market) will mature.
Currently we are in a speculative phase which will soon have to either sit down and shut-up or stand-up and show how thishyped marketis going to move from proof-of-concept, significant investments and use-case scenarios through to in-use case scenarios and peopl