High prices mean even higher volatility

[jaysabi]

The fact that the price volatility of bitcoin is capable of increasing with an increase in its price can be seen even in the example of the last rise in the price of bitcoin to $ 40,000. On January 10, the bitcoin price exceeded $ 40,000, and the very next day, on January 11, it dropped to $ 31,000, on January 12, it rose above $ 36,000. If you look at the CoinMarketCap table at this time, the price of bitcoin just jumped up and down by hundreds of dollars every few seconds. Previously, when its price was lower, such high volatility was not observed. You can imagine how its price will sometimes jump when it reaches a hundred thousand dollars or more

That's what the theory says

Both the rise and the fall are driven by institutional money going in and out of the market. Simple folks don't actively sell but they still accumulate religiously on pullbacks. This leads to an ever decreasing supply side because the number of bitcoins cannot significantly increase as there are only so many bitcoins (as opposed to, for example, gold, which supply is elastic). As a result, volatility is set to outrun the rise in prices, and this is exactly what we see happening right now. Eventually, the Bitcoin Big Rip event should occur (at least hypothetically)

Interesting to read this long-duration thread over the years at this point. I think I was skeptical of the idea 3 years ago, but I think the general thesis has borne out pretty well over this most recent run up in the price, and I think the institutional investors moving in really illustrate well the effect it has on the price and the crunch on the supply side driving volatility.

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[exstasie]

There is an unpopular opinion (mine) that after reaching a certain price level (high enough), BTC and any other expensive coin can collapse to the bottom simply because this price will become unreasonably high. And that's good.

What do you mean by "to the bottom?" Are you suggesting BTC, like tulips, will one day pop the bubble of all bubbles, and then collapse to ~$0?

We all know parabolic increases are unsustainable. That's just common sense. 2011, 2013, and 2017 all come to mind. But the bear market bottoms are always higher lows. Are you suggesting that will change?

Thus, people will finally understand that earn fiat from cryptocurrencies is not why they exist.

Every bear market shakes out the "get rich quick" speculators and teaches them that lesson. Underlying all the hype and speculation is a robust, useful, secure network that's growing larger everyday. And that's why it always recovers stronger than before.

[Sapphire915]

Its true. Bitcoins higher prices now causes higher volatility and brought much intense emotions to every individual in crypto world. And I guess, its just normal in the digital market that we must be ready anytime. After all, I believe that we are all aware that Bitcoins and other crypto currencies are naturally volatile and when the prices go up higher, the volatility will be more triggered.

[deisik]

There is an unpopular opinion (mine) that after reaching a certain price level (high enough), BTC and any other expensive coin can collapse to the bottom simply because this price will become unreasonably high. And that's good. Thus, people will finally understand that earn fiat from cryptocurrencies is not why they exist

I don't think we will ever live up to that (the Big Rip situation)

The price itself is not important. You can just as easily say that Bitcoin is already a staggering 3 million dollars per 100 bitcoins or measly 0.0003 dollar per 1 satoshi, and both ideas would be correct. What matters here is when volatility becomes so high that we can no longer speak of a price metric as such (aka Big Rip)

However, it still seems to be a purely hypothetical construct as volatility would likely turn out self-limiting at the end of the day, but that doesn't mean prices crashing into the ground. In other words, we should rather end up with an equilibrium in volatility, and that would ultimately determine the price. It's important to clearly see the causal chain here

[PhoenixZephyrus]

I would say that its just due to the nature of bitcoin, and the moderately-high volatility that it brings with it. And, that's not counting the corrects, i.e., when the price is riding a short-term bull run, like it did end-2020-new years of 2021, reaching an ATH of ~41K USD, but then it corrected itself to a more stable price of $32-34K USD (currently). In these kind of short term bull runs, the market is very likely to flip, as the consensus becomes that the risk of trading higher might cause losses.

Changes like that often occur, I've seen it in 2017-18 too, but there's very little to none chance that bitcoin suddenly flops down to $0 and crashes into the ground- that's just not happening as long as there is a healthy growing community of users who having faith and HODLing BTC.

[Mauser]

The higher volatility we see right now is more short term in my opinion. Due to the high bitcoin price there are probably quite a few investors who want to realise their gains and will less their coins resulting in a moderate price drop. Once all these investors dumped their coins the prices should stabilise again. As most investors are long term holders of their coins and will hold on to them.

[deisik]

The higher volatility we see right now is more short term in my opinion

It is actually the other way around. The longer timeframe you look at, the more volatile and unstable the price will be. Put differently, Bitcoin can only be considered stable (read, less volatile) on a very short timeframe like a day or two (see the price dynamic from 2017 till now). If anything, Bitcoin is a paragon of instability (or anything but a paragon of stability)

Due to the high bitcoin price there are probably quite a few investors who want to realise their gains and will less their coins resulting in a moderate price drop. Once all these investors dumped their coins the prices should stabilise again

The limited supply of new bitcoins makes it impossible in the long run. As liquidity constantly shrinks (i.e. the number of available coins diminishes), a greater number of small-time holders are now able to affect the price big-time. So it is a never ending process at higher prices and the primary driver of volatility as it requires less and less money, both fiat and crypto, to move the price either way. We had started to see these effects even at 10k when the price stayed there for too long. It is just a huge inflow of institutional money that pushed the prices to their current levels, and probably specifically because of this (low supply). But the pattern is not going anywhere, and it has started to reveal itself all over again

In simple terms, expect more to come

[Vishnu.Reang]

The higher volatility we see right now is more short term in my opinion. Due to the high bitcoin price there are probably quite a few investors who want to realise their gains and will less their coins resulting in a moderate price drop. Once all these investors dumped their coins the prices should stabilise again. As most investors are long term holders of their coins and will hold on to them.

That is my guess as well. One thing I have noticed is that there is a liquidity crunch right now, mostly affecting the smaller exchanges. The larger exchanges are doing fine, but in due course they will also face issues in maintaining the liquidity. Actually this process started a long time back, after the third bock reward halving. However, the impact was not immediately visible due to the excess supply. Now that excess supply has evaporated and demand is outstripping the supply.

[deisik]

There seems to be (have been) another factor at play here, that of altcoins. The last few weeks altcoins have been performing a lot better than the Godfather cryptocurrency, and folks were feverishly selling into the Bitcoin support (while it was there) so that they could get the dough to join the altcoin rally

Then it backfired massively



Remember, every bullrun ends with a bulltrap

[favicoin]

All my friends who got into the crypto game by altcoins, also own Bitcoin. No exception. So the 'altcoin retail' is definitely a factor for BTC's liquidity as well. Besides that, liquidity providers do their part, and don't forget institutional entities are also getting more and more into asset classes like lending, for example, using both DeFi and CeFi. "The lack of liquidity also creates arbitrage opportunities, for example, if different crypto exchanges have different liquidity levels. Crypto lending provides liquidity to institutional investors such as hedge funds, crypto exchanges, or market makers, allowing them to exploit these arbitrage opportunities." (source https://www.cryptostudio.com/lending-abc/market/) so it's definitely interesting to see how official/gov entities and institutional investors are adapting in the next weeks and months, for sure, combined with all the retail acceptance...

[fullhdpixel]

There seems to be (have been) another factor at play here, that of altcoins. The last few weeks altcoins have been performing a lot better than the Godfather cryptocurrency, and folks were feverishly selling into the Bitcoin support (while it was there) so that they could get the dough to join the altcoin rally

Then it backfired massively



Remember, every bullrun ends with a bulltrap

I would sort of agree with you but that's going a bit too far isn't it? I mean by the logic of the image we could say that there is a tramboline or something which is a huuuuge one where every bull falls waaaaaaaayyy down and then they fall to the trampoline and jump back up. I am not saying we will never have a crash, it could happen, you could see the start of a huge bear run right now that sees bitcoin going all the way down under 30k, all of these could happen, I can't argue against it.

However we can't say that it is the end of it all, it is just a crash and just like every other crash we had so far I am sure that it will result with another bull run, maybe in 6 months, maybe in a year, or maybe 3 years but I am sure that eventually we will go back over 64k guaranteed, it may not be right away, it may take years but that will happen. This is why the image is sort of wrong, it represents basically an end, this is just the road, we go up and we go down.

[deisik]

This is why the image is sort of wrong, it represents basically an end

When the bullrun is fueled by borrowed money, it kinda is. That's the whole idea behind a bulltrap as otherwise everyone could simply ride it out

[awik p]

There seems to be (have been) another factor at play here, that of altcoins. The last few weeks altcoins have been performing a lot better than the Godfather cryptocurrency, and folks were feverishly selling into the Bitcoin support (while it was there) so that they could get the dough to join the altcoin rally

Then it backfired massively



Remember, every bullrun ends with a bulltrap

I would sort of agree with you but that's going a bit too far isn't it? I mean by the logic of the image we could say that there is a tramboline or something which is a huuuuge one where every bull falls waaaaaaaayyy down and then they fall to the trampoline and jump back up. I am not saying we will never have a crash, it could happen, you could see the start of a huge bear run right now that sees bitcoin going all the way down under 30k, all of these could happen, I can't argue against it.

However we can't say that it is the end of it all, it is just a crash and just like every other crash we had so far I am sure that it will result with another bull run, maybe in 6 months, maybe in a year, or maybe 3 years but I am sure that eventually we will go back over 64k guaranteed, it may not be right away, it may take years but that will happen. This is why the image is sort of wrong, it represents basically an end, this is just the road, we go up and we go down.

if I think in crypto anything can happen. Indeed, the above statement is not wrong, after we experience bullrun, it ends with a bull trap. we know very large volatile, with large price corrections as well. but in me bitcoin will continue to rise and form new peaks, even though a major correction occurred

[Argoo]

I don't fully understand the logic behind there being more volatility at higher prices, in terms of dollar swings then sure but in terms of percentage swings I don't see how the higher price could lead to that? In fact I probably see more of the opposite, higher prices generally will mean more adoption, more adoption means money better spread means less possibilities for manipulation.

An increase in the price of a decentralized cryptocurrency may not be noticeable for an increase in volatility in terms of percentage ratios, but if you just look at the price of a cryptocurrency, which is what most of the participants in this market are interested in, it is very noticeable. With the relatively high current price values ​​of bitcoin, we see that during the day its price can change by several thousand dollars, and very few people even pay attention to this. However, if bitcoin had a price of about ten thousand dollars, then this would be very significant and noticeable.

[inoes]

Trading volume = volatility.  it can be manipulated.  that's what I know.  as long as there are buys and sells it will be trading volume.  but with high volatility, it guarantees that the market is crowded, like the law of economics, if the market is crowded then the goods are in high demand, the opportunity to get a bigger profit.  but is it manipulation or real?  fortunately with the Blockchain system we can check it.  who plays the price and who is involved.  so we better be more careful

[AndySt]

Trading volume = volatility.  it can be manipulated.  that's what I know.  as long as there are buys and sells it will be trading volume.  but with high volatility, it guarantees that the market is crowded, like the law of economics, if the market is crowded then the goods are in high demand, the opportunity to get a bigger profit.  but is it manipulation or real?  fortunately with the Blockchain system we can check it.  who plays the price and who is involved.  so we better be more careful

You can check the source of the volatility as much as you want, but this does not negate the volatility itself. Any normal market has volatility, but high trading volumes also do not necessarily serve as a source of high volatility, because much depends on the structure of the market and short-term high volatility can be replaced by long-term periods of relative market stability. However, it is quite clear that a very rapid price increase is indeed fraught with high volatility, when this growth is not supported by underlying factors.

[Emmychris]

Well for me I think there is actually nothing here to argue about, obviously the guy is blindly agueing with you because we all know the higher the prices the higher volatility, once prices goes way too high the correction might bring a massive downtrend. Check out when bitcoin was at 9k in 2020 and the pandemic came which made bitcoin fell to about 4k usd  we can possibly say the deep is high but not as high as bitcoin falling from 64K to 32k in this present time, this alone shows the higher the prices the higher the volatility.

[deisik]

Well for me I think there is actually nothing here to argue about, obviously the guy is blindly agueing with you because we all know the higher the prices the higher volatility, once prices goes way too high the correction might bring a massive downtrend. Check out when bitcoin was at 9k in 2020 and the pandemic came which made bitcoin fell to about 4k usd  we can possibly say the deep is high but not as high as bitcoin falling from 64K to 32k in this present time, this alone shows the higher the prices the higher the volatility

I see how it seems obvious now

It's definitely easy to be wise in hindsight. However, it's only the so-called recency bias playing its dirty tricks on us and distorting our judgment. As the posts above clearly demonstrate, whenever the price stays put for some time, people are more and more inclined to think that it will go on, or stay, like that in the future. While in reality, it is the exact opposite. The longer the price stays in a tight range, the stronger the subsequent price action will be

[Obito]

That's cause the people in the market is likely to sell their bitcoin when they know that they are going to get a really big profit and we can't blame them, some have been a long time hodlers and some are too eager to sell because they find it hard to believe their capital grew at a really fast pace.

[kotajikikox]

That's cause the people in the market is likely to sell their bitcoin when they know that they are going to get a really big profit and we can't blame them, some have been a long time hodlers and some are too eager to sell because they find it hard to believe their capital grew at a really fast pace.

Well that will make the market move at least but does not enough to make the price that volatile , We are talking about small investors here but what we are not looking about those big fish.
the whales that makes the market very volatile because just 2 or 3 of them will Sell or Buy surely the market will shake and the volatile may shown.

This is why the image is sort of wrong, it represents basically an end

When the bullrun is fueled by borrowed money, it kinda is. That's the whole idea behind a bulltrap as otherwise everyone could simply ride it out

Only if you know how to ride and when to ride, that is the benefit of those High paid Signals , at some point they seems to know when this will happen.