High prices mean even higher volatility

[deisik]

Well, Bitcoin has just crashed below 12,000 dollars per coin after reaching the 20,000 dollar mark just a week or so ago, and I won't be surprised if it dips below 10k dollars by the end of the day. Right now the decline is already over 40% (the lowest price today was below the 11,600 mark, just in case). And it seems that we haven't seen so dramatic price fall for long (since 2015 if I'm not mistaken). So, does anyone want to challenge my high price means higher volatility mega theory now or what?

I'm all ears mates

the lowest price today was below the 11,600 mark, just in case

It's already crashed below 11,000 dollars

[handini]

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. 

if to my knowledge, the contest on the market every demand down then the price will rise, while the demand will rise, the possibility of bitcoin strategy also be like that, because during this time the demand for bitcoin more and more.
to the extent that the government can not know anyone who uses bitcoin.

[mOgliE]

Hi,

You are right, indeed.
Still, the volatility of bitcoin is an important issue.

Specialists, economists and so on, are right when they say that bitcoin cannot be a real currency as long as it is so volatile. Just because you can't have the costs of your daily shopping increase by 1000% within a year or change drastically every couple of hours.

Any idea about how to stabilize it?

[Gerci]

For example, if you own options when implied volatility increases, the price of these options climbs higher. A change in implied volatility for the worse can create losses, however, even when you are right about the stock's ...
But a high volatility in the price of an underlying also means that there is a higher chance that the underlying price ... So even though there is a possibility of prices falling, you wouldn't mind paying higher premiums in a volatile ...

[malikusama]

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.  

So you think that If the price is rising slowly then it will be less volatile than if it is rising rapidly?
The price volatility doesn't depend on rapid or gradual growth, the thing that matters is the demand with respect to the supply. The supply is same and demand is increasing rapidly so the manipulators (whales that owns hundreds of bitcoins)present in the market have more affect on the price.
Did you observe the recent price dips of more than around $2000-4000 in few hours after the price crosses $12K? And even today it falls below $11k from $16K which was at $19.6K three days back.

[nominee]

Hi,

You are right, indeed.
Still, the volatility of bitcoin is an important issue.

Specialists, economists and so on, are right when they say that bitcoin cannot be a real currency as long as it is so volatile. Just because you can't have the costs of your daily shopping increase by 1000% within a year or change drastically every couple of hours.

Any idea about how to stabilize it?

To me, there is no way to stabilize it. It's the market, how can you do this? To make it more stable, you need more market participants and more investors to make a homogenous environment in the market. That's it.

[iqlimasyadiqa]

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.  

So you think that If the price is rising slowly then it will be less volatile than if it is rising rapidly?
The price volatility doesn't depend on rapid or gradual growth, the thing that matters is the demand with respect to the supply. The supply is same and demand is increasing rapidly so the manipulators (whales that owns hundreds of bitcoins)present in the market have more affect on the price.
Did you observe the recent price dips of more than around $2000-4000 in few hours after the price crosses $12K? And even today it falls below $11k from $16K which was at $19.6K three days back.

For me demand is the most important thing because it will affect the price of Bitcoin very quickly and also easily. I acknowledge that things like this have to be on guard because if demand decreases then it proves that people's trust in Bitcoin has begun to decline. But if the price of Bitcoin can increase then we can ensure that the demand for Bitcoin is on the rise and this has proved that Bitcoin is on a positive track.

[deisik]

Hi,

You are right, indeed.
Still, the volatility of bitcoin is an important issue.

Specialists, economists and so on, are right when they say that bitcoin cannot be a real currency as long as it is so volatile. Just because you can't have the costs of your daily shopping increase by 1000% within a year or change drastically every couple of hours.

Any idea about how to stabilize it?

There is no need to stabilize Bitcoin

I mean there's no need for any special measures. In fact, it is pretty easy to get rid of volatility by hedging, and I guess this is what most payment processors like BitPay do anyway. The point is we need instantly fast and dirty cheap transactions. Further, if Bitcoin (or any other coin, for that matter) gets widespread use in the real economy (which is impossible without fast and cheap transactions), its price will stabilize all by itself. For example, why the US dollar is so stable? Because it is used everywhere, and then the constant value of goods which you can buy with the dollar kicks in and extinguishes all serious price fluctuations and volatility

[signaturecoin]

This is true, when bitcoin dropped by more than 40% a few months ago it was nothing.
I mean, a 40% of 2000$ was just $4000, and it did crashed by that amount on July.
But now it crashed from 40% and it went from $20k to $11k, in fact, it is the same percentage, but everybody is complaning that this is the massive crash that all the shorters were expecting to see.

[pushkarmore]

I agree with you to some extent that higher price leads to higher volatility as volatility even comes after certain time of period like it starts after sideways market ends where the volatility is low during sideways market and at that time supply and demand are dried up and slowly it increases with increase in volatility and rise in prices.

[darkangel11]

If you watched the charts i'm sure you've noticed that the jump between 17 and 20K USD was on low volume. The price was never really there. If you don't get it i'll explain.
If you have very little orders on exchanges and not many people willing to sell at given prices you can put up a buy order of 1 BTC and move the price up by 100 USD, simply because there are no orders at certain price range. People saw a very fast increase and set up for sale at the level of $20k with very little orders between 100 and 20. So the price  went there in numbers but only a very small group of people did the trading. If that happens you usually also need a very small amount of coins to push the price down and this is exactly what happened. The real trading starts much lower and you can see it's taking more and more time to push the price through the support levels. Every $1000 down takes much more time than it did to dump the first 3k. It's all normal, but you see it like something huge and keep asking "damn it went down by $5k already what's going on?"

[deisik]

If you watched the charts i'm sure you've noticed that the jump between 17 and 20K USD was on low volume. The price was never really there. If you don't get it i'll explain

I guess you should read the OP again

Since this is what I'm telling myself. So let me quote that part for you (emphasis added):

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

As you can see, low volume that you speak of is what I call market thinning (well, this is actually an established term). In fact, that's what inexorably happens when there is only limited supply of anything (like Bitcoin, for example). When the price rises in these circumstances, the orderbooks become shallow with no volume. That's basically the reason behind the likely surge in volatility which is about to happen. Thus the market becomes highly susceptible to sell orders which otherwise wouldn't send the price down so much so fast. Hope this helps

[bluefly]

I think it really depends on the trading volume. I do not deny that right now the volatility is really high

[ssuchy]

This is true, when bitcoin dropped by more than 40% a few months ago it was nothing.
I mean, a 40% of 2000$ was just $4000, and it did crashed by that amount on July.
But now it crashed from 40% and it went from $20k to $11k, in fact, it is the same percentage, but everybody is complaning that this is the massive crash that all the shorters were expecting to see.

this situation could have been predicted for a long time and many Bitcoin users have been waiting for this opportunity for a long time to actually buy Bitcoin by Price for 40 or 30% cheaper. Just think, that from the New Year these investments can double.

[ModGirl]

Hi,

You are right, indeed.
Still, the volatility of bitcoin is an important issue.

Specialists, economists and so on, are right when they say that bitcoin cannot be a real currency as long as it is so volatile. Just because you can't have the costs of your daily shopping increase by 1000% within a year or change drastically every couple of hours.

Any idea about how to stabilize it?

This is the topic to be discussed on this forum with seriousness. Actually you are right to an extent that what if something have so low price one day and then the other day bitcoins’ prices are getting higher and you see the price of that thing just get double or triple. So yes, till this price volatility comes to an end or it converted to stability, this can’t be a national or legal currency.

[greenchy]

This is true, when bitcoin dropped by more than 40% a few months ago it was nothing.
I mean, a 40% of 2000$ was just $4000, and it did crashed by that amount on July.
But now it crashed from 40% and it went from $20k to $11k, in fact, it is the same percentage, but everybody is complaning that this is the massive crash that all the shorters were expecting to see.

I also think that there is no reason for worry. The price of bitcoin is constantly changing. I believe that the price will rise in the near future

[hatshepsut93]

https://www.buybitcoinworldwide.com/volatility-index/

Historical data clearly shows that Bitcoin's volatility index was at the highest during early days, when the price was low. The second chart has log scale for price, which is also pretty good for comparing volatility when zoomed out. So, volatility has increased a bit comparing with the last year, but still nowhere near as high as it was during early days. Your theory might correctly predict or explain volatility in some few cases, but it's going to be wrong in the long run.

[deisik]

https://www.buybitcoinworldwide.com/volatility-index/

Historical data clearly shows that Bitcoin's volatility index was at the highest during early days, when the price was low. The second chart has log scale for price, which is also pretty good for comparing volatility when zoomed out. So, volatility has increased a bit comparing with the last year, but still nowhere near as high as it was during early days. Your theory might correctly predict or explain volatility in some few cases, but it's going to be wrong in the long run.

Evidently, you don't see the forest for the trees

Basically, are you going to say that Bitcoin volatility will decrease when prices surge further, say, over 30,000 dollars and what (provided they ever do, of course)? You, like other people, seem to forget that earlier days of Bitcoin are irrelevant since there was tremendous supply of new coins each day, week after week, relative to the total amount of coins mined till then. I have explained in my OP that this theory works when the supply is limited as is what we have by now when the supply of new coins is mostly negligible. This is the main cause why volatility is set to prevail over prices in the long run specifically

[darkangel]

I think it really depends on the trading volume. I do not deny that right now the volatility is really high

Trading volume is an important factor, it is also the decisive factor of the fluctuation of a currency. The value of a currency does not affect its fluctuations; conversely, its value depends heavily on its fluctuations.

[DBronze98]

I agree with you when any altcoin is worth the higher then of course the risk of evaporation is higher. So when the higher the value of the market fluctuations, bitcoin greatly affect the crypto market.