High prices mean even higher volatility

[Duogembrot]

With higher bitcoin prices, it could be a good practice to look at percentage shifts rather than quantity of dollars or other btc might be exchanged for. While the dollar amount of price shifts increases as bitcoin's price rises higher, the percentage rates of price shifts appears to be stabilising. Bitcoin is becoming less volatile over time, in terms of percentage shifts, as it becomes a more known phenomena and things like forks are better known and understood with a prior historical precedent.

Bitcoin is not becoming less volatile

Why do you people not read the OP? I mentioned there that Bitcoin is going even more volatile as the price rises. And yes, I mean relative changes, I think in relative changes if you please, i.e. changes in percentages specifically. I've even given an example above which proves that. Now we just need Bitcoin to go down as low as 6-7k dollars to prove me right. Or we could at first surge as high as 25k and then fall back to 10k dollars. This is not because of external factors affecting Bitcoin (though they certainly do). This is due to Bitcoin limited supply and the inverse relationship between Bitcoin supply and its price, most of the time

bringing bitcoin back to a 6-7k dollar price is very unlikely, the more logic it is for people who know the benefits of having bitcoin then they will buy as much bitcoin as possible no matter what price there is if the investor or the bank is in dire need then the price is expensive.

[BitcoinCommodor]

The high price certainly brings with it the high volatility it is very clear and clear. Speaking of Bitcoin, when a high fidelity arrives, there are sudden drops and then the old fiyata comes back. It happens at times when this is the opposite, but very rare. For example after segwit was canceled there were very interesting movements in the price of Bitcoin.

I have seen many people talk about this, and I’m starting to believe it is true. The price has been going up heavily all this while and people has been making lots and lots of profits without loss. I have also seen some say that price will drop soon and from the looks of things, when the price will drop, it will also drop heavily. So higher prices means higher Volatility.

[deisik]

With higher bitcoin prices, it could be a good practice to look at percentage shifts rather than quantity of dollars or other btc might be exchanged for. While the dollar amount of price shifts increases as bitcoin's price rises higher, the percentage rates of price shifts appears to be stabilising. Bitcoin is becoming less volatile over time, in terms of percentage shifts, as it becomes a more known phenomena and things like forks are better known and understood with a prior historical precedent.

Bitcoin is not becoming less volatile

Why do you people not read the OP? I mentioned there that Bitcoin is going even more volatile as the price rises. And yes, I mean relative changes, I think in relative changes if you please, i.e. changes in percentages specifically. I've even given an example above which proves that. Now we just need Bitcoin to go down as low as 6-7k dollars to prove me right. Or we could at first surge as high as 25k and then fall back to 10k dollars. This is not because of external factors affecting Bitcoin (though they certainly do). This is due to Bitcoin limited supply and the inverse relationship between Bitcoin supply and its price, most of the time

bringing bitcoin back to a 6-7k dollar price is very unlikely, the more logic it is for people who know the benefits of having bitcoin then they will buy as much bitcoin as possible no matter what price there is if the investor or the bank is in dire need then the price is expensive.

Why is it unlikely?

Is it because you just happen to feel or think it is unlikely? But such feelings and thought can be very deceptive and utterly misleading since this is how market fools most players. Typically, you shouldn't rely on your "gut feelings" when making investments, those who do end up broken eventually. Anyway, let's remember that prices were in that range (6-7k dollars) just a month or so ago. If Bitcoin has risen so fast to so high levels, what would prevent it from falling back to where it started as fast?

[cryptocrusher]

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.

I'm curious what you actually see

Because if you looked at price charts you would certainly see the opposite picture. For example, when Bitcoin first reached the 6k dollar mark it crashed back to 4k, then it went up to almost 8k and corrected to 5.4k. Now we are at 15k, and how low do you think we will go? Further, there is no adoption of Bitcoin in real economy. Steam just dropped it. It is adoption between speculators, but I can't fathom how that could mean less volatility. In fact, it does the opposite

I do not mean from a historical point of view I am speaking from a purely theory based point of view. I do not see the logical connect between prices being higher leading to more volatility in percentage terms. Of course we can look back and see that there is more volatility lately but I think that is because with the increasing price bitcoin are changing hands far more often. If we were to reach a higher price and be relatively stable there I do not see how that would cause more volatility in itself.

Okay, let's speak theory here

If we proceed from the fact that the supply of bitcoins is limited, higher prices may mean less supply provided the coins are being stashed away (which they are). The latter necessarily means that there is no direct relationship between prices and supply (i.e. the higher the price, the higher the supply), which is the case with goods or assets the supply of which can be increased (for example, due to expansion of production). This, in its turn, means that a smaller number of coins can cause stronger price changes or fluctuations, i.e. volatility. In other words, Bitcoin becomes susceptible to sudden bursts of volatility when some whale decides to buy into or cash out of Bitcoin

In this scenario there would certainly be bigger percentage swings on a less frequent basis (those times you mentioned when a whale sells/buys) but on a daily basis it could suggest the opposite. Given as you said more people would be holding their coins there would be less coins in active circulation and so those trades that do occur will be with a smaller amount of coins and therefore less able to greatly influence the price. I think realistically there are two ways of looking at it and you can't say with certainty that one or the other will happen.

[deisik]

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.

I'm curious what you actually see

Because if you looked at price charts you would certainly see the opposite picture. For example, when Bitcoin first reached the 6k dollar mark it crashed back to 4k, then it went up to almost 8k and corrected to 5.4k. Now we are at 15k, and how low do you think we will go? Further, there is no adoption of Bitcoin in real economy. Steam just dropped it. It is adoption between speculators, but I can't fathom how that could mean less volatility. In fact, it does the opposite

I do not mean from a historical point of view I am speaking from a purely theory based point of view. I do not see the logical connect between prices being higher leading to more volatility in percentage terms. Of course we can look back and see that there is more volatility lately but I think that is because with the increasing price bitcoin are changing hands far more often. If we were to reach a higher price and be relatively stable there I do not see how that would cause more volatility in itself.

Okay, let's speak theory here

If we proceed from the fact that the supply of bitcoins is limited, higher prices may mean less supply provided the coins are being stashed away (which they are). The latter necessarily means that there is no direct relationship between prices and supply (i.e. the higher the price, the higher the supply), which is the case with goods or assets the supply of which can be increased (for example, due to expansion of production). This, in its turn, means that a smaller number of coins can cause stronger price changes or fluctuations, i.e. volatility. In other words, Bitcoin becomes susceptible to sudden bursts of volatility when some whale decides to buy into or cash out of Bitcoin

In this scenario there would certainly be bigger percentage swings on a less frequent basis (those times you mentioned when a whale sells/buys) but on a daily basis it could suggest the opposite. Given as you said more people would be holding their coins there would be less coins in active circulation and so those trades that do occur will be with a smaller amount of coins and therefore less able to greatly influence the price. I think realistically there are two ways of looking at it and you can't say with certainty that one or the other will happen

Yes, this is what I mean

In these circumstances, the market will be thin at higher prices, so at first the price should surge to the moon (due to supply running dry) and then, whenever a whale (or two) finally decides to cash out, we will see a monumental crash. Obviously, we are at phase 1 of this cycle and if we see the phase 2, at which the price should go down, say, to 6-7k dollars or below, then my hypothesis will be proved right. We may continue to rise further but this doesn't mean that we won't crash in the end. At least, that's what my theory of a run-away Bitcoin volatility says

[SixOfFive]

Can't say anything right now as BTC High prices may lead to stability also. Right now BTC is in amateur stage as it is gaining more and more popularity now a days so news users are joining every min that mean more volatility but once all the dust settle down I am sure BTC will be quite stable even if its price raises upto $100K

[Hydrogen]

Bitcoin is not becoming less volatile

Why do you people not read the OP? I mentioned there that Bitcoin is going even more volatile as the price rises. And yes, I mean relative changes, I think in relative changes if you please, i.e. changes in percentages specifically. I've even given an example above which proves that. Now we just need Bitcoin to go down as low as 6-7k dollars to prove me right. Or we could at first surge as high as 25k and then fall back to 10k dollars. This is not because of external factors affecting Bitcoin (though they certainly do). This is due to Bitcoin limited supply and the inverse relationship between Bitcoin supply and its price, most of the time

Here are specific arguments for bitcoin becoming less volatile.

#1 Fork announcements and deployments are having a smaller percentage effect on bitcoin price as time goes on. Bitcoin's price is moving less and less everytime news of a new fork emerges. Back in the days of Bitcoin Unlimited and during the first fork known as Bitcoin Cash, BTC's price fluctuated wildly. As time goes on, and we see new forks emerge such as bitcoin gold, we see a less volatile bitcoin.

#2 SEC announcements regarding bitcoin ETF's are having less of an effect on price. Earlier this year, the SEC ruled not to approve a bitcoin ETF. I think that may have had a 10% to 20% effect on bitcoin price. There may have been a second ruling which had a far reduced effect on bitcoin volatility although I'm going purely from memory here.

#3 Criticism of bitcoin from Jamie Dimon and others is having less of an effect on price. I think years ago when Paul Krugman criticized bitcoin it may actually have had an effect on price. Today when Jamie Dimon and economists awarded nobel prizes in their field criticize bitcoin, it appears to have little or no effect.

#4 Events such as china banning bitcoin exchanges is having less of an effect. When china banned bitcoin around 2014 it had a massive effect on bitcoin's value. Compare to 2017 when china banned exchanges once again with a far more limited effect on price.

As time goes on and things like forks are better quantified and better known phenomena. It would appear that bitcoin's value fluctuates less. There is less fear and anxiety from traders and it might be fair to say bitcoin is more stable as a result. Bitcoin becoming more decentralized and evenly spread throughout the world (rather than centralized in china) could also contribute more to stability and lower volatility over time.

There's a generic statement I used here which says: "less of an effect on price". That is to imply a reduced net percentage effect, rather than measured in dollars, euros, rupies, etc.

[dulce dd121990]

High prices aren't going to help anyone, and it's the thing that's pretty shit. Like yes, it may end up helping out the miners and the people that are trading. But in the long run for Bitcoin it's not going to help the people that have been here from the start and want to see Bitcoin survive and thrive through these times. We want to see Bitcoin used by companies, people, etc. We like that the price is up, but does it do anything for us? No.

More volatility is going to kill us, sadly.

We have different views here in bitcoin, for me even though bitcoin is not yet used in the stores and other payment transactions, but it is slowly adopt in other transactions also that you never mentioned. We just have to wait for the other companies to accept it. And how can bitcoin volatility can make us kill if this thing can help us in our investments. like buying and selling coins. I have lot of friends succeeded in their bitcoin investment career and even a single regret they never experienced.

[cryptocrusher]

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.

I'm curious what you actually see

Because if you looked at price charts you would certainly see the opposite picture. For example, when Bitcoin first reached the 6k dollar mark it crashed back to 4k, then it went up to almost 8k and corrected to 5.4k. Now we are at 15k, and how low do you think we will go? Further, there is no adoption of Bitcoin in real economy. Steam just dropped it. It is adoption between speculators, but I can't fathom how that could mean less volatility. In fact, it does the opposite

I do not mean from a historical point of view I am speaking from a purely theory based point of view. I do not see the logical connect between prices being higher leading to more volatility in percentage terms. Of course we can look back and see that there is more volatility lately but I think that is because with the increasing price bitcoin are changing hands far more often. If we were to reach a higher price and be relatively stable there I do not see how that would cause more volatility in itself.

Okay, let's speak theory here

If we proceed from the fact that the supply of bitcoins is limited, higher prices may mean less supply provided the coins are being stashed away (which they are). The latter necessarily means that there is no direct relationship between prices and supply (i.e. the higher the price, the higher the supply), which is the case with goods or assets the supply of which can be increased (for example, due to expansion of production). This, in its turn, means that a smaller number of coins can cause stronger price changes or fluctuations, i.e. volatility. In other words, Bitcoin becomes susceptible to sudden bursts of volatility when some whale decides to buy into or cash out of Bitcoin

In this scenario there would certainly be bigger percentage swings on a less frequent basis (those times you mentioned when a whale sells/buys) but on a daily basis it could suggest the opposite. Given as you said more people would be holding their coins there would be less coins in active circulation and so those trades that do occur will be with a smaller amount of coins and therefore less able to greatly influence the price. I think realistically there are two ways of looking at it and you can't say with certainty that one or the other will happen

Yes, this is what I mean

In these circumstances, the market will be thin at higher prices, so at first the price should surge to the moon (due to supply running dry) and then, whenever a whale (or two) finally decides to cash out, we will see a monumental crash. Obviously, we are at phase 1 of this cycle and if we see the phase 2, at which the price should go down, say, to 6-7k dollars or below, then my hypothesis will be proved right. We may continue to rise further but this doesn't mean that we won't crash in the end. At least, that's what my theory of a run-away Bitcoin volatility says

I read the other day how the top 1000 bitcoin holders hold something like 40% of all of the bitcoins in circulation. It just shows how a scenario that you speak of is highly possible. At some point in time they will surely liquidate their bitcoin, it won't even have to be a lot of them but say 100000 bitcoin coming in to the market would surely be enough to see the price fall quite dramatically.

[rocketbits]

This is a continuation of my argument with some dude called TheQuin. You can see the beginning of this discussion here. Since this is off-topic in that thread, I start this one which is about that thing specifically. Everyone is welcome to chime in on this (provided you have something valuable to say, of course). Here are some quotes that would give you a clue what the whole argument is about (I prudently skip the part where the dude called me various vile names):

In fact, the price growth which is inevitable with more money being poured into the system will cause even higher price fluctuations (in relative terms) because the monetary supply (i.e. the number of coins mined to date) remains the same while the market supply should necessarily run dry at higher prices on average. Otherwise the prices just wouldn't rise. As a consequence, the whole market becomes thin, and therefore it turns out to be more susceptible to whales and those who become whales at these prices when they start dumping their stashes

you argued that "with more money being poured into the system will cause even higher price fluctuations"
I disagreed with that. "higher price fluctuations" is higher volatility so I stated what actually does cause higher volatility

You didn't do that

Basically, all you did is just gave a definition of what volatility is. And while we are at it, I warn you to stay away from making value judgments such as "you just arrogantly dismiss" and similar things. I didn't dismiss anything, yet less arrogantly (I really don't care, so it is essentially an issue with your own perception), I just pointed out that you make statements or assertions that are irrelevant to the point discussed. Giving a definition of volatility is just one example of that (you can simply call it noise). In short, I know what volatility is. Hope this makes you happier somehow

The higher its value the more volatile the currency will be, the more so with the BTC where we have a limited amount of money supply. But I believe that such a volatibity is not exclusive to the BTC, if we draw data we will see that several countries went through situations similar to their currencies, many of them came to exchange currency because it reached chaotic level, as was the case in Brazil, due to high inflation and the great volatility they exchanged from the cruise for the real (current currency). What will dictate how great all this volatility will surely be the patrons.

[arpon11]

For Bitcoin to use as money and for mainstream retail shops to accept it as a mode of payment for good services its price must stabilize and not volatile. To me me,  the higher price of Bitcoin now is not how important Bitcoin is but speculators pump things up and every crypto currencies lovers should work towards Bitcoin been see as money instead of store of values like stocks and commodities.

[deisik]

Bitcoin is not becoming less volatile

Why do you people not read the OP? I mentioned there that Bitcoin is going even more volatile as the price rises. And yes, I mean relative changes, I think in relative changes if you please, i.e. changes in percentages specifically. I've even given an example above which proves that. Now we just need Bitcoin to go down as low as 6-7k dollars to prove me right. Or we could at first surge as high as 25k and then fall back to 10k dollars. This is not because of external factors affecting Bitcoin (though they certainly do). This is due to Bitcoin limited supply and the inverse relationship between Bitcoin supply and its price, most of the time

Here are specific arguments for bitcoin becoming less volatile.

#1 Fork announcements and deployments are having a smaller percentage effect on bitcoin price as time goes on. Bitcoin's price is moving less and less everytime news of a new fork emerges. Back in the days of Bitcoin Unlimited and during the first fork known as Bitcoin Cash, BTC's price fluctuated wildly. As time goes on, and we see new forks emerge such as bitcoin gold, we see a less volatile bitcoin.

#2 SEC announcements regarding bitcoin ETF's are having less of an effect on price. Earlier this year, the SEC ruled not to approve a bitcoin ETF. I think that may have had a 10% to 20% effect on bitcoin price. There may have been a second ruling which had a far reduced effect on bitcoin volatility although I'm going purely from memory here.

#3 Criticism of bitcoin from Jamie Dimon and others is having less of an effect on price. I think years ago when Paul Krugman criticized bitcoin it may actually have had an effect on price. Today when Jamie Dimon and economists awarded nobel prizes in their field criticize bitcoin, it appears to have little or no effect.

#4 Events such as china banning bitcoin exchanges is having less of an effect. When china banned bitcoin around 2014 it had a massive effect on bitcoin's value. Compare to 2017 when china banned exchanges once again with a far more limited effect on price.

As time goes on and things like forks are better quantified and better known phenomena. It would appear that bitcoin's value fluctuates less. There is less fear and anxiety from traders and it might be fair to say bitcoin is more stable as a result. Bitcoin becoming more decentralized and evenly spread throughout the world (rather than centralized in china) could also contribute more to stability and lower volatility over time

I can hardly call these points "arguments"

These are some external factors that affect Bitcoin price, not so much the volatility of it. They may (or may not, for the record) affect volatility as well in some convoluted way, but you have to provide something more substantial that would negate the effect of Bitcoin supply diminishing when prices rise until some whale steps in and cashes out monumentally, thereby crashing the price. Anyway, we can just sit and wait, and if the prices stay at their current level for a few months give or take a few thousand dollars, then my theory doesn't hold

There's a generic statement I used here which says: "less of an effect on price". That is to imply a reduced net percentage effect, rather than measured in dollars, euros, rupies, etc.

Why don't you get I mean exactly that? That is, volatility measured in percentages of the price?

I read the other day how the top 1000 bitcoin holders hold something like 40% of all of the bitcoins in circulation. It just shows how a scenario that you speak of is highly possible. At some point in time they will surely liquidate their bitcoin, it won't even have to be a lot of them but say 100000 bitcoin coming in to the market would surely be enough to see the price fall quite dramatically.

Yeah, I read that piece too

[pugman]

The market demand and supply is what causes the prices to fluctuate, volatility gets higher or lesser depending upon circumstances, in layman's terms. The volatility of the price can be the same or higher or lower, it's mostly determined on the reason for the price rise and that's how it usually works right? Or am I totally dumb and saying bull shit here? Enlighten me then. But.. Volatility can also be dependent upon on elasticity of demand and supply. Elasticity basically means the degree of responsiveness to demand or supply due to change in price. And evaluating the factors affecting these elasticity of demand and supply the answer to the question of OP can be answered.

[iram1011]

So, I was looking at the yearly bitcoin volatility chart. I would suggest you to go through it once. Volatility is varying highly with external demand than increasing price. The maximum volatility of the year was during April-May when there was an excess demand from Japan. After that volatility remained quite medium as there was demand but not excess, but price was increasing meanwhile. And now when there is again an overall hike in demand globally, volatility is high.

[fuer44]

So, I was looking at the yearly bitcoin volatility chart. I would suggest you to go through it once. Volatility is varying highly with external demand than increasing price. The maximum volatility of the year was during April-May when there was an excess demand from Japan. After that volatility remained quite medium as there was demand but not excess, but price was increasing meanwhile. And now when there is again an overall hike in demand globally, volatility is high.

in the month of December, the value of bitcoin rose very drastically. you are more understanding and always observe volatility chart, does this mean volatility in this month is high enough? when you said, the maximum volatility is in April-May.

[iram1011]

So, I was looking at the yearly bitcoin volatility chart. I would suggest you to go through it once. Volatility is varying highly with external demand than increasing price. The maximum volatility of the year was during April-May when there was an excess demand from Japan. After that volatility remained quite medium as there was demand but not excess, but price was increasing meanwhile. And now when there is again an overall hike in demand globally, volatility is high.

in the month of December, the value of bitcoin rose very drastically. you are more understanding and always observe volatility chart, does this mean volatility in this month is high enough? when you said, the maximum volatility is in April-May.

It was highest in April-May. But is still high in December too because there is global excess demand. Some new major market like India is emerging bringing in more demand.

[kryptqnick]

So, I was looking at the yearly bitcoin volatility chart. I would suggest you to go through it once. Volatility is varying highly with external demand than increasing price. The maximum volatility of the year was during April-May when there was an excess demand from Japan. After that volatility remained quite medium as there was demand but not excess, but price was increasing meanwhile. And now when there is again an overall hike in demand globally, volatility is high.

Good point. I think that maybe volatility can't be considered to have a strong connection with the price. It's just like altcoins and bitcoin. Some say that when btc is up alts are down, others say the opposite. If we look at the charts then it's sometimes the first way and other times - the second.
The only sort of obvious thing is that when the capitalization grows, the harder it becomes to manipulate the price. So, the flaws become more .. natural, they reflect the general will of people and their attitude to btc.

[boyshx]

No it’s not like that. All physical currencies like Gold, Crude oil, USD are not that volatile even their prices become high. This formula is applicable only for bitcoin cryptocurrency. Price and volatility is determined by the flow of demand and supply. In case of bitcoin demand is unlimited and is ever-growing. But supply is restricted to 21 million bitcoins. As a result volatility is increasing. In case of centralised currencies, when volatility rises Bank, Government or Central authority interferes and manages the demand. Bitcoin is a decentralised currency so this option is not applicable. So as the demand will increase so will the price and the volatility?

[audaciousbeing]

No it’s not like that. All physical currencies like Gold, Crude oil, USD are not that volatile even their prices become high. This formula is applicable only for bitcoin cryptocurrency. Price and volatility is determined by the flow of demand and supply. In case of bitcoin demand is unlimited and is ever-growing. But supply is restricted to 21 million bitcoins. As a result volatility is increasing. In case of centralised currencies, when volatility rises Bank, Government or Central authority interferes and manages the demand. Bitcoin is a decentralised currency so this option is not applicable. So as the demand will increase so will the price and the volatility?

I think I agree with this point of view because even the fiat that the comparison is being against bitcoin would have been more volatile than bitcoin if the government had allowed the free flow of demand and supply without interfering in the market. Today we go to the store to buy goods and expect it to be the same price we bought it last week or last month and even if we expect and increase, maybe some cents or dollars which is bearable all this didn't happen by magic but because of the agents of government regulating the activities of the market and the capitalist within the system.

People by default are greedy and when it comes to bitcoin, its just because nobody is regulating it, that is why so much volatility is being witnessed. Even in the stock market, prices don't move this way but to me, its a mixture of both the good and the bad.

[Domenc]

I don't think so, it is right to say that "High price will lead to high volatility" in fact sudden increase or decrease in its value can be termed as high volatility and also if price is rising at continuous and slow pace then it is definitely not stepping towards high volatility. I think as the price increases it is is divided among larger population and which will eventually lead to low volatility as price will not be driven by smaller group. When coin value is limited to less users it can be subject to high volatility easily.