Bitcoin volatility is higher than normal but is this a cause for concern? According to data from analytics company Skew, Bitcoin volatility rose until March 2020, the month when Bitcoin collapsed due to COVID-19.
“Actual volatility” refers to the average fluctuation of a cryptocurrency price over a 30-day period. Skew measures volatility by calculating the standard deviation in the bitcoin price over time.
Company data showed that the figure touched 103% last month. This means that the Bitcoin price has deviated 103% from its average price in the last 30 days.
Last month’s contributors to this were the bitcoin price spikes and dips. The big sale on January 11 caused Bitcoin to experience its biggest daily price drop and in the weeks before Bitcoin reached its highest ever price of $ 41,000.
During the bull rally, price fluctuations are more common as investors make money at different points. Pedro Febrero, an analyst at Quantum Economics, told Decrypt:
The more volatility the price has, the greater the magnitude of the change in bitcoin prices. During the bull rally, this is expected.
What goes down can go up
Despite Bitcoin’s volatility, it outperformed other assets like gold last year.
Plus, the volatility of Bitcoin in general is declining: as the price and market value of the cryptocurrency have increased over time, the asset’s volatility has declined, and over the past year, Bitcoin and other cryptocurrencies have risen and outperformed traditional investments.
An anonymous investor followed ten cryptocurrencies throughout 2020 and found them outperforming the US stock market eight times: $ 1,000 crypto investment increased 139% and the S&P 500 increased 16%.