Volatility - major reasons for ?!

[hv_]

I just try to find the major reasons for the very high volatility of bitcoins price we all encountered over the last years.

1) Exponential Growth ( in trust and usage)

It's clear this is a very strong reason to cause price volatility, since we have double and double of requesters that all needs to get coins from a scarce bitcoin supply.
So we see price squeezes all over the time (more up than down). Further we have no or lost experience with such exponential growth process esp in money (last adoption was gold some 1000 years before)


2) Evaluation Base CCY ?
I have the strong suspicion that bitcoins volatility is positive correlated to the volatility of the lowest trusted fiat currencies' volatility in the world.
Sadly I cannot proof this by averaging the historical volatilities of a 'poor's currency basket' of (Zimbabwe$, Venezuela$, Egypt pound, Jemen slotty, Syria Dinar,..xyz...) but I estimate, that we have same volatility there as in bitcoin. And all people living in those countries should be way better off with bitcoin and it's vola!
We just see and measure BTC/USD - volatility is high, but we forget where it's based on - on the poor ccys all together - but they are dominant here.

3) Heterogeneous / Fragmented Markets
We now have some 100 different exchanges and local places where you can exchange you bitcoin against any other fiat or crypto. There is no condensed order book / matching for a trade and limited arbitrage due to capital protection of some states.
I'd guess we'd see a fraction of the actual volatility, if we would have a (ideal) single world exchange, where all must trade BTC/USD (USD is just a default example for a world fiat and rest crypto ccy) .


Any other reasons you could see?

[Wipro]

I just try to find the major reasons for the very high volatility of bitcoins price we all encountered over the last years.

1) Exponential Growth ( in trust and usage)

It's clear this is a very strong reason to cause price volatility, since we have double and double of requesters that all needs to get coins from a scarce bitcoin supply.
So we see price squeezes all over the time (more up than down). Further we have no or lost experience with such exponential growth process esp in money (last adoption was gold some 1000 years before)


2) Evaluation Base CCY ?
I have the strong suspicion that bitcoins volatility is positive correlated to the volatility of the lowest trusted fiat currencies' volatility in the world.
Sadly I cannot proof this by averaging the historical volatilities of a 'poor's currency basket' of (Zimbabwe$, Venezuela$, Egypt pound, Jemen slotty, Syria Dinar,..xyz...) but I estimate, that we have same volatility there as in bitcoin. And all people living in those countries should be way better off with bitcoin and it's vola!
We just see and measure BTC/USD - volatility is high, but we forget where it's based on - on the poor ccys all together - but they are dominant here.

3) Heterogeneous Markets
We now have some 100 different exchanges and local places where you can exchange you bitcoin against any other fiat or crypto. There is no condensed order book / matching for a trade and limited arbitrage due to capital protection of some states.
I'd guess we'd see a fraction of the actual valtility,if we would have a (ideal) single world exchange, where all must trade BTC/USD (USD is just a default example for a world fiat and rest crypto ccy) .


Any other reasons you could see?

Bitcoin supply and demand will rate the volatility of the bitcoin value. As adoption rate increases price will move forward and if there is any market fall happens then bitcoin related business or project that time will see the dump in price.

[CryptonomyCapital]

I think one of the reasons is that Bitcoin is not tied to any real activity, for example, the currency exchange rate depends on the trade in goods and many other factors. Bitcoin depends much on the mood of the crowd.

[gamerfan]

I think the only reason for that is because Bitcoin does not have a real economy yet. It is just used for trading purpose, unline other traditional currencies which are used to buy and sell stuff

[hv_]

I think the only reason for that is because Bitcoin does not have a real economy yet. It is just used for trading purpose, unline other traditional currencies which are used to buy and sell stuff

For all bigger currencies there is a huge 'efficient' FX market / huge volume trading in place - that keeps the vola in a narrow range.

And yes - economy is also a fact there and mostly corridored to +2% p.a. - vola is low due to that as well...

[slaman29]

I just try to find the major reasons for the very high volatility of bitcoins price we all encountered over the last years.

1) Exponential Growth ( in trust and usage)

It's clear this is a very strong reason to cause price volatility, since we have double and double of requesters that all needs to get coins from a scarce bitcoin supply.
So we see price squeezes all over the time (more up than down). Further we have no or lost experience with such exponential growth process esp in money (last adoption was gold some 1000 years before)


2) Evaluation Base CCY ?
I have the strong suspicion that bitcoins volatility is positive correlated to the volatility of the lowest trusted fiat currencies' volatility in the world.
Sadly I cannot proof this by averaging the historical volatilities of a 'poor's currency basket' of (Zimbabwe$, Venezuela$, Egypt pound, Jemen slotty, Syria Dinar,..xyz...) but I estimate, that we have same volatility there as in bitcoin. And all people living in those countries should be way better off with bitcoin and it's vola!
We just see and measure BTC/USD - volatility is high, but we forget where it's based on - on the poor ccys all together - but they are dominant here.

3) Heterogeneous / Fragmented Markets
We now have some 100 different exchanges and local places where you can exchange you bitcoin against any other fiat or crypto. There is no condensed order book / matching for a trade and limited arbitrage due to capital protection of some states.
I'd guess we'd see a fraction of the actual volatility, if we would have a (ideal) single world exchange, where all must trade BTC/USD (USD is just a default example for a world fiat and rest crypto ccy) .


Any other reasons you could see?

I cannot really comment on 1, or even 2... but I do know a few of those currencies, and not sure they can even out to Bitcoin's 10,000% or more growth from 2009 to 2017. Very loose connection.

But on 3, a single world exchange isn't possible... even today for forex you don't have ONE exchange but many. Each country also mostly trades on its own basket.

[Kprawn]

You have to remember that Bitcoin are not widely accepted yet. You have a bunch of whales manipulating the price and you have a bunch of small

events causing the spikes and the dumps. Some of the biggest events was hacks like MtGox and scandals like Silkroad. In between all of that, you

have slow mainstream adoption of the technology on a global scale. 

[BillyBobZorton]

Since bitcoin is a global market, it is exposed to all kind of frictions, different countries having different reasons to buy or dump it and so on. The marketcap is too small to not fluctuate a lot, which is good because it shows there's a ton of upwards potential. Once the marketcap is worth 7+ trillion like gold, the price will be way less volatile.

[iamTom123]

Bitcoin for sure has been one of the most volatile currency (if we have to compared it to the fiat money) and had it been a national currency of a certain country then it might pose some big problems though of course there would be many holders who can be ecstatic seeing their money jumping in value in a very short time.

One of the many factors for Bitcoin (and this can also be true with other commodities traded in an open market) is the ever increasing demand and the limited supply. Had it been possible to just "print" or create Bitcoin by command then we can easily lessen the volatility as what many central banks are doing to prop their own sagging economies.

Now, may be the next question is this: Is volatility helping or hurting Bitcoin?

[ladydark]

Bitcoin is a decentralized currency which has no authority to control its price.Its value is driven by the support from the community.Its price increases or decreases directly in proportion to increase or decrease in demand for bitcoin.There is no variation in supply since it has been already set as 21 million coins for supply.Greater the demand,more increase in price and smaller the demand,lower the price.In this way,we could say that bitcoin expresses its true value.

[Gotottack]

Bitcoin is a decentralized currency which has no authority to control its price.Its value is driven by the support from the community.Its price increases or decreases directly in proportion to increase or decrease in demand for bitcoin.There is no variation in supply since it has been already set as 21 million coins for supply.Greater the demand,more increase in price and smaller the demand,lower the price.In this way,we could say that bitcoin expresses its true value.

This is the reason for the volatility. Since bitcoins are not backed up by anything, unlike in fiat currency where it is backed by gold and/or the government that issued the currency, this results to bitcoins being valued by the users themselves. That is why we see a whole lot of volatility here. Maybe in the future when there are more people using it then we could see some stability.

[stiffbud]

I think one of the reasons is that Bitcoin is not tied to any real activity, for example, the currency exchange rate depends on the trade in goods and many other factors. Bitcoin depends much on the mood of the crowd.

By crowd I think it's more appropriate to refer to these people as the whales. The big traders are the ones causing so much votality. Ordinary traders are the one ones who are going with the flow. Bitcoin is easily being manipulated with huge investors. If these whales feels like they want big profit they will pump and other people will do the same and then eventually leave once they received profit and then the price will go through correction.

[virtualdn]

I think BTC has this volatility because of the whale and their pumps and dumps. It is a main source of income for those who still cash out in FIAT... imagine what will happen when people won't cash out BTC so quick... a greater value for sure!

[skorupi17]

I just try to find the major reasons for the very high volatility of bitcoins price we all encountered over the last years.

1) Exponential Growth ( in trust and usage)

It's clear this is a very strong reason to cause price volatility, since we have double and double of requesters that all needs to get coins from a scarce bitcoin supply.
So we see price squeezes all over the time (more up than down). Further we have no or lost experience with such exponential growth process esp in money (last adoption was gold some 1000 years before)


2) Evaluation Base CCY ?
I have the strong suspicion that bitcoins volatility is positive correlated to the volatility of the lowest trusted fiat currencies' volatility in the world.
Sadly I cannot proof this by averaging the historical volatilities of a 'poor's currency basket' of (Zimbabwe$, Venezuela$, Egypt pound, Jemen slotty, Syria Dinar,..xyz...) but I estimate, that we have same volatility there as in bitcoin. And all people living in those countries should be way better off with bitcoin and it's vola!
We just see and measure BTC/USD - volatility is high, but we forget where it's based on - on the poor ccys all together - but they are dominant here.

3) Heterogeneous / Fragmented Markets
We now have some 100 different exchanges and local places where you can exchange you bitcoin against any other fiat or crypto. There is no condensed order book / matching for a trade and limited arbitrage due to capital protection of some states.
I'd guess we'd see a fraction of the actual volatility, if we would have a (ideal) single world exchange, where all must trade BTC/USD (USD is just a default example for a world fiat and rest crypto ccy) .


Any other reasons you could see?

I cannot agree with your reasons stated for I think none of them is the reason of Bitcoin being volatile in nature.

Number 1 is not a reason why Bitcoin is volatile, it is a result. Bitcoin is very volatile that is why we can see an exponential growth in Bitcoin's price.

I do not know why relating and comparing Bitcoin to an existing (or not) currency out there would justify and answer why Bitcoin is volatile.

Number 3 does not reflect volatility, we can see varying prices from different exchanges because of their own policy. These exchanges are businesses wherein the owner/s dictate/s how much is the price of Bitcoin in buying and selling with respect to the actual value of Bitcoin. So there is no volatility in here.

The main reasons why Bitcoin is volatile are:

1. Decentralized - Being decentralized, no entity dictates or controls the price of Bitcoin which then leaves to the market to decide for Bitcoin's price. This leads to number 2.

2. Demand and Supply - Since the market dictates the price of Bitcoin, the only variable that is measured in here is the volume of demand with respect to the available supply in the market. The demand and supply of Bitcoin in the market changes every time. This is the main reason why Bitcoin is very volatile in nature.

[hardtime]

I think BTC has this volatility because of the whale and their pumps and dumps. It is a main source of income for those who still cash out in FIAT... imagine what will happen when people won't cash out BTC so quick... a greater value for sure!

Whale(s) are really going to be trying to takeover this entire currency to be using it as a HUGE source of income, we can see already how profitable they've been with it and how much they're really pulling out of Bitcoin. It's pretty insane to see the amount of trading that's occurring in Bitcoin and other Cryptos right now which are REALLY riding up the price.

The major reasons that I can see are going to have to be the people joining into BTC right now and thinking that they're going to be making a quick buck off of it, it's just like the roaring 20's when everyone in America was getting into different stocks because everything was going up and up. People were using leverage and loans and so on to amplify wins, little did they know the bubble had to pop at some point and everyone was left in the dust. I think the same sort of thing is going to happen with bitcoin, the only question we really have is WHEN?

[passionsurf]

I think the main reason is because the price is undervalued. If bitcoin were trading at $100k a coin, then a swing of $10k in either direction (which would be huge by today's standards) would not be considered so huge.

[hv_]

I think the main reason is because the price is undervalued. If bitcoin were trading at $100k a coin, then a swing of $10k in either direction (which would be huge by today's standards) would not be considered so huge.

Bitcoin is traded very freely - you have sellers and buyes finding a price. The evaluation IS market to market - fair and correct.

I guess you speak about the trend - this is clear a massive up-trend and  we see many days with 10% up and a few 20% down - doesn't matter if we are in different price regimes:
2011: 2 -30   
2013: 100-1200
2017: 800 -3000

2022:10k-100k ?

 

[recklessMe]

Volatility might be driven by the decentralized nature of the currency and demand among users. The rate is very responsive to all the changes within the crypto environment. As it is a relatively new concept for finances, no one knows, how to control it or somehow restrain.

[deisik]

I just try to find the major reasons for the very high volatility of bitcoins price we all encountered over the last years.

1) Exponential Growth ( in trust and usage)
It's clear this is a very strong reason to cause price volatility, since we have double and double of requesters that all needs to get coins from a scarce bitcoin supply.
So we see price squeezes all over the time (more up than down). Further we have no or lost experience with such exponential growth process esp in money (last adoption was gold some 1000 years before)

2) Evaluation Base CCY ?
I have the strong suspicion that bitcoins volatility is positive correlated to the volatility of the lowest trusted fiat currencies' volatility in the world.
Sadly I cannot proof this by averaging the historical volatilities of a 'poor's currency basket' of (Zimbabwe$, Venezuela$, Egypt pound, Jemen slotty, Syria Dinar,..xyz...) but I estimate, that we have same volatility there as in bitcoin. And all people living in those countries should be way better off with bitcoin and it's vola!
We just see and measure BTC/USD - volatility is high, but we forget where it's based on - on the poor ccys all together - but they are dominant here.

3) Heterogeneous / Fragmented Markets
We now have some 100 different exchanges and local places where you can exchange you bitcoin against any other fiat or crypto. There is no condensed order book / matching for a trade and limited arbitrage due to capital protection of some states.
I'd guess we'd see a fraction of the actual volatility, if we would have a (ideal) single world exchange, where all must trade BTC/USD (USD is just a default example for a world fiat and rest crypto ccy) .

Any other reasons you could see?

First of all, I don't see these three reasons as main causes for volatility, at least, not to any meaningful degree

Further, as to me, the primary cause of Bitcoin volatility is that it remains purely a financial asset, i.e. it is either traded (directly, on exchanges) or indirectly (by merchants, when they sell the bitcoins they receive as payment for fiat), or just stashed away. In other words, if there were a closed loop Bitcoin economy, and the majority of bitcoins were used for payment and not for trading, that would bring volatility down. This is basically the same with penny stocks. They are mostly useless as long term investments and as an instrument of controlling a company (i.e. it makes no sense to buy them if you are looking for voting rights and more control over the business itself)

[DoublerHunter]

The demand s one of the major reason of price volatility and we will not have that volatility if the demand is not increasing or decreasing. Bitcoin is a decentralized coin and it means that bitcoin is only depending to the peoples demand and if that demand will change then it will reflect for volatility of the price of bitcoin. That is the only thing that i can see for the volatility of bitcoin.