Bitcoin has a bad name for being overly volatile, but it is a sea of calm when compared to S&P 500 stocks, says investment management firm VanEck.
Many see Bitcoin as not only a convenient form of payment that is future-friendly but as a wise long-term investment. But, deep down, everybody knows that its price is intrinsically volatile, and even if it gets significantly bigger, its core level of volatility is not going to fall.
However, VanEck compared Bitcoin to S&P 500 companies and found that the cryptocurrency was less volatile than 172 stocks of the S&P 500 companies in a 90 day period. Last year, Bitcoin exhibited lower volatility than 145 stocks in the index.
According to VanEck, traditionalists have always criticized Bitcoin among all other cryptocurrencies for its volatility and decentralized nature. But the firm believes that one should study the market before making any revelations about it. Cryptocurrency is a complex asset and needs proper understanding of how things are dealt with here.
The firm said that investors and enthusiasts might get surprised about knowing that there are some major assets that have been acting more volatile than Bitcoin in recent times.
Take Tesla for example. As per data from TradingView, Tesla (TSLA) has been witnessing significant daily percentage moves since June end, in consonance with the 30-day realized volatility data. In comparison, Bitcoin saw a -1.25% daily move during the same period, which was 52% of the time.
Much of the volatility regarding Bitcoin is due to the limited penetration in the capital and stock markets, regulatory hurdles, and sensitivity to small total market size.
So, is Bitcoin getting less volatile?
Bitcoin’s wild price movements are inhibiting it from becoming a prominent medium of exchange. In the present scenario, merchants and retailers are timid to accept Bitcoins. They think that if they do, they could witness significant losses. Customers, on the other hand, are reluctant to spend them because they have always struggled to find a robust exchange medium where they make cryptocurrency transactions without any hassle.
However, in recent times, there have been plausible developments in the crypto exchange. With the likes of Liber Ltd, one of the breakthrough cryptocurrency exchanges in the market, people are finding it easy to transact cryptocurrencies.
Liber Ltd offers a secure, transparent, decentralized, and low-cost trading forex experience and also has its own Libfx token, which is currently valued at US$53.28 at the time of writing. It accepts payment by both Ethereum (ETH) and Bitcoin (BTC). It means Bitcoin investors can change Libfx token into BTC for trading and charging without much trouble. Also, the Libfx token can be used as a payment method on the trading floor. And the token owners have the exclusive rights to purchase the stocks of Liber Ltd as it is listed on the stock exchange floor.
With tools and platforms like this, it is making people more and more aware of the crypto platform, allowing them to do industry best practices for Bitcoin trading. Plus, this is also making the transaction process quick and hassle-free for them, while providing advantages, such as:
- High Security: With the use of best technology, platforms like Liber Ltd are providing high digital security for all kinds of trading and transactions.
- Economical: As there are no agents in between, the overall process also becomes money-saving for the traders.
- Great Experience: Technologies like AI and Blockchain are further helping in making the transaction process more convenient and exciting for traders.
All in all, platforms like Liber Ltd are making it possible for both retailers and customers to transact in Bitcoin without any hassle.
Experts say that Bitcoin’s high volatility is intrinsic to its nature. Well, truth to be told, Bitcoin is like a beauty contest where players gamble on what average perspective expects the average perspective to be. It doesn’t matter how grand the game gets; the best collective guess will always be hyper-volatile (Bitcoin’s current market price).
On the other hand, assets like commodities, banknotes, gold, and stocks have a fundamental value, which helps to anchor their price.
Nevertheless, experts claim that since a US Bitcoin exchange-traded fund doesn’t exist, its price can travel very far as time passes, unlike stocks and commodities. The day when it shows up on the US Bitcoin exchange-traded fund, it might very well show similarities in terms of volatility with respect to S&P 500 companies.
The Impact of Bad Press
The mystery that surrounds Bitcoin (BTC) means that bad press has the capability to manipulate its price more than it does on other assets. Moreover, the excitement and uniqueness of technology bring positive hype, leading to quickly rising prices. Valiant investors who love taking risks would love to enter the whole new waters of investment. However, any perception shift could cause the value of that asset to fall or rise. And in the case of Bitcoin, it could manifest as an even larger swing in its price. But these are changing times. Digital currencies are being widely accepted.
Please note that perception is not the only reason why Bitcoin is volatile. One of the most attractive features of Bitcoin and other digital currencies is their inherent suitability to the global market. It is true the digital currency has helped people envision a world where monetary transactions are as easy as sending and receiving emails.
But, in order for individuals and businesses to completely adapt and embrace this option, world governments need to deal with its issues like decentralization, regulation, and what role they play in their respective economies.