Bitcoin’s (BTC) volatility in the annual timeframe has dropped below that of top tech stocks, including Tesla, Meta, and Nvidia, signaling its growth toward becoming a more mature and stable asset class.
Bitcoin becomes more stable than many S&P 500 stocks
As of May 11, Bitcoin’s 1-year realized volatility, which represents the standard deviation of returns from the mean return of a market, was at around 44.88%. In comparison, the annualized realized volatility of “magnificent seven” stocks such as Tesla, Meta, and Nvidia was over 50%.
Bitcoin’s 1-year volatility vs. magnificent seven stocks. Source: Bloomberg
Moreover, Bitcoin has shown relatively lower volatility compared to 33 of the roughly 500 companies in the S&P 500 index, noted Fidelity Investment in its latest report.
Notably:
“Bitcoin was actually less volatile than 92 of the S&P 500 stocks in October of 2023 when using the 90-day realized historical volatility figures. Some of these names are also large-cap and mega-cap stocks.” Bitcoin vs. S&P 500 companies 360-day volatility. Source: Bloomberg
Bitcoin mirroring gold volatility patterns
Bitcoin’s annualized volatility in its nascent years was over 200%, a trend typical among newer asset classes with higher capital inflows. This is because these inflows represented a smaller proportion of the total capital base.
Consequently, new investments are less likely to significantly influence market prices or the decisions of marginal buyers and sellers, as illustrated in Bitcoin’s long-term volatility chart below, showing a gradual stabilization of volatility over time with a downward-sloping regression line.
Bitcoin realized volatility vs. market cap. Source: Glassnode
Bitcoin’s recent volatility patterns closely resemble gold’s in its early trading years. Like gold, Bitcoin has undergone a period of price discovery, marked initially by high volatility, which gradually subsides as the market matures.
Gold prices surged with inflation after its decoupling from the U.S. dollar in 1971 and the legalization of its private ownership in 1974. As a result, the precious metal’s volatility reached over 80 during the…
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