As of May 11th, the actual volatility of Bitcoin over the past year is only 44.88%. This is lower than top tech stocks such as Tesla, Meta, and Nvidia, as well as the approximately 500 companies in the S&P 500 index.
According to the latest data, as of May 11th, the actual volatility of Bitcoin over the past year is only 44.88%. In comparison, the annualized volatility of top tech stocks including Tesla, Meta, and Nvidia is all over 50%. Therefore, the significant decrease in Bitcoin’s volatility is seen by the global market as a more mature and stable investment asset.
BTC volatility is relatively low compared to the S&P 500
Further analysis from Fidelity’s report shows that the volatility of Bitcoin is relatively low compared to the approximately 500 companies in the S&P 500 index. Analysts pointed out:
In the early stages of the market, Bitcoin exhibited an annualized volatility of over 200%, which also marked its characteristics as an emerging asset class. Fidelity Digital Assets research analyst Zack Wainwright stated that this high volatility usually occurs when new capital enters the market, especially when this capital is relatively small compared to the existing market size.
However, these new inflows of capital are enough to cause price changes, especially in emerging markets with small market sizes and limited participants. In these markets, even small buy or sell orders can lead to significant price fluctuations because the market is not yet mature and does not have sufficient trading volume to absorb the impact of this new capital.
Over time, as the market matures, the volatility of Bitcoin decreases. This process can be seen from the long-term volatility trend chart, where the regression line clearly slopes downward, indicating that with increasing market acceptance and increased trading activity, Bitcoin’s price fluctuations become more stable.
As the market value increases, Bitcoin volatility decreases
Zack Wainwright also pointed out that the volatility pattern of Bitcoin is similar to that of gold in the early market. Gold also experienced similar price discovery and volatility adjustment phases during the period after the US dollar was unpegged in 1971 and the legalization of private ownership in 1974, accompanied by inflationary periods. During these periods, the gold market also showed initial high volatility, but gradually stabilized as the market matured and received more policy support.
Low volatility is a precursor to price increases!
In addition, it is worth noting that Zack Wainwright stated that a period of low volatility means that the price of Bitcoin has smaller changes and the market is relatively calm. This stable environment may lay the foundation for future price increases. He provided four examples from past markets, one of which occurred in early 2024, while the other three also experienced sharp price increases after low volatility.
These examples indicate that when Bitcoin’s volatility reaches abnormally low levels, it may be a signal that the market is about to turn. During these periods, because the price changes are small, investors may increase their holdings or new investors may enter the market, increasing buying pressure. Once the market sentiment changes, it can lead to rapid price increases.
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