The volatility in the price of a bitcoin is falling over time, or not.

[Negotiation]

Even if the market goes down the demand and price rise of currencies will push the market upwards Bitcoin price volatility but double the demand for investment will not allow Bitcoin price volatility. The future of Bitcoin is very good and as the demand for it continues to increase traders will bring the price back to the previous level by investing in Bitcoin despite the volatility in prices.

[Kakmakr]

In theory this is what is suppose to happen as more and more bitcoins are distributed to more people over time, because previously we had a high concentration of coins in the hands of a small group of people, also called "Whales" and they manipulated the price by dumping large amounts of coins when the price is high and also buying a lot of coins when the price is low.

When more coins are distributed to more people, the influence of the whales are reduced and you will not see the wild fluctuations in the price, like you saw in the early days.

The opposite can also happen, if Fiat whales (large traders) enter the Bitcoin scene, because they will most definitely buy and sell large amounts of coins, when they speculate in this market.   

[laredo7mm]

The following chart shows the volatility in the price of a bitcoin since the beginning. Each point shows the coefficient of variation for the year surrounding that date.

Note that it is beginning to rise again as the price has shot up to a new high, but the overall trend is clear -- the volatility in the price of a bitcoin is falling.



The coefficient of variation is a measure of volatility. It is the standard deviation relative to the average.

Edit: Fixed the graph

This can be seen from this chart below too. In 2013 when BTC cross its previous ATH it went up to 37X and in the next bull run in 2017 when it crosses the 2013 ATH level its growth was 17X than its previous one. That means BTC volatility is decreasing over time as you mentioned. I think it's easily predictable that what could be BTC next ATH level.

If BTC increases 4X from its previous ATH then we can expect its price to around 80k which is not impossible in my opinion.

[atjiat]

One more thing regarding the volatility of Bitcoin's. The higher the prices the higher in USD terms can be to show as volatility. A bitcoin price of 20,000 USD is not that much impacted of a 1,000 USD drop as a bitcoin price of 10,000 USD. And another feature we see right now is that more and more investors join the market. Once the market drops we would see a lot of opportunity buyers buying the coins.

For the whole of 2020, Bitcoin really attracted a fairly large amount of investment, and especially in November of this year. But I believe that every investor hopes for the best prospects for Bitcoin, starting from this period and it is very difficult to predict what kind of confidence users will have after, if we indirectly assume that the rate will fall to $ 1000. I believe that this is not even worth thinking about, since it can bring not only a strong blow to the foreign exchange market, but also possibly destroy it, since the confidence in Bitcoin will be greatly undermined.

[tbterryboy]

Well that was expected because with any asset the market moves quicker while its new and has limited investors and holders but once the asset becomes more and more famous and common then the market settles down accordingly and even feels saturated at times, but because the supply for Bitcoins is fixed and limited the value will always keep rising and hence volatility might be low but will always remain there in the market.

There is a good chance that Bitcoin itself becomes lot more stable and these stable coins will become quite useless. Personally I don't mind bitcoin being less volatile because as someone who saves bitcoins for future and trade them, it would be better if it slowly rises instead of rising and going down because it creates serious panic.

[el kaka22]

Well, the difference in volatility is caused by the high prices for sure. When you are at 10 cents per coin, going to 50 cents and going down to 30 cents is easier, it happens and doesn't require billions of dollars involved neither. Whereas when you are doing it $10k to $20k and back to $18k that is still a huge volatility but still lower than what it used to be but requires probably 1000x more money to do that in the end as well. Which means the higher the price goes, the lower the % of volatility will become.

Going from $100k to $110k is only a 10% change but it makes someone who owns 1 bitcoin earn 10 thousand dollars profit, they made a huge profit in the dollar sense but when it comes to % it was very tiny, to make the same amount of profit in dollars from $10k to $20k that is 100% increase instead but still same amount of profit in dollars. Less volatility but same dollar amount.

[error08]

bitcoin volatility lessened is due to the increasing number of adopters who own bitcoin, if more people buying bitcoin and it spread widely then the volatility will be reduced over time. The only thing that makes it so volatile because of whales who have so much money or hold too much bitcoin that they can manipulate the market at their will.
So, we can expect bitcoin to become less volatile if more people hold bitcoins which makes it evenly distributed worldwide, not some parties have too much portion of bitcoins.

[odolvlobo]

I believe OP's lesson is, if you want to "buy the dip and HODL", confirm your bids nearer, not farther from the current price, or else you'll miss it.

No. The lesson is that as adoption increases, the volatility will fall. When the volatility approaches that of fiat currencies, there will be no longer be any expectations of high returns from holding bitcoins. HODLing and speculative buying will no longer have any benefits, and bitcoin will finally show its strength as a medium-of-exchange.

[odolvlobo]

Well, the difference in volatility is caused by the high prices for sure.

The price has nothing to do with volatility. If you have $1000 worth of bitcoins, a 10% change in the price will result in a change in your holdings of $100, whether the value of a bitcoin is $1 or $100000.

Another way to think about it is this -- Is the volatility in the price of a satoshi worth $0.0002 any different in the volatility in the price of a bitcoin worth $20000? The answer is no.

[Argoo]

You are just not wrong about this, the volatility in bitcoin price is truly decreasing, if we can analyse bitcoin in the earlier years of its creation, during the first halving, it was able to move 30x before the second halving while it was able to move 10x before the third halving. Now it is very possible bitcoin will not move 10x till next halving probably in 2024, although I am not sure or certain about this but seem like bitcoin can not increase from $8200 pre-halving price to a price above $80000 before the next halving. If this is affirmed as at then, then bitcoin price volatility is decreasing to make this recent price also continuing to be more valid.

In my opinion, you are talking here about the ability of bitcoin to further price growth, and not about the volatility of its price.  Volatility is a deviation from the average price value, and in my opinion, the higher the price of bitcoin, the greater its volatility.  It's just that low prices do not allow deep fluctuations, but high prices do.  Therefore, I think that the bitcoin price roller coaster is still ahead.

[jaysabi]

The following chart shows the volatility in the price of a bitcoin since the beginning. Each point shows the coefficient of variation for the year surrounding that date.

Note that it is beginning to rise again as the price has shot up to a new high, but the overall trend is clear -- the volatility in the price of a bitcoin is falling.



The coefficient of variation is a measure of volatility. It is the standard deviation relative to the average.

Edit: Fixed the graph

I think this is the law of large numbers coming into effect.  There are a couple ways this factors in.  1) the amount of holders is now much larger than it was last time bitcoin was at these levels, and so with bitcoin be spread around a larger number of actors, the current whales have less ability to move the price as much as the whales of the past have had.  2)  With the market cap materially higher at the current price levels than the market cap the last time the price was at these same levels, it takes a lot more money to materially move the price.  So again, we see the ability of whales to move the price in a dramatic fashion to be diminished.  Both of these factors reduce price volatility overall.

[Casdinyard]

Quite in contrast with the definition of volatility. Volatility speaks for inconsistency so it would be impossible to know if the market is not having low volatile but rather, being less volatile, especially such characteristic is in nature. The market I think will be the same even in the future because there is a limited supply and its price will only be determined by the demand in the market as well as the volume.
 

One more thing regarding the volatility of Bitcoin's. The higher the prices the higher in USD terms can be to show as volatility. A bitcoin price of 20,000 USD is not that much impacted of a 1,000 USD drop as a bitcoin price of 10,000 USD. And another feature we see right now is that more and more investors join the market. Once the market drops we would see a lot of opportunity buyers buying the coins.

The market value of USD is not interconnected with the market price of Bitcoin so comparing won't really have a sense other than getting or forming assumptions. Volatility as well will not be affected by the vast increase on the number of people engaging to this technology especially due to the fact that not all people who are interested are actually making an investment.

[verita1]

I agree with OP that bitcoin volatility is lower now. Which shows that the events that have been happening have positively influenced bitcoin.
There is a thought that does not come out of my head after reading this tweet:

Watch how traders, shitcoiners and weak hands transfer their #bitcoin to strong hands like Grayscale, Paypal, Square, MicroStrategy etc. These BTC will disappear from the market and go into deep cold storage and stay there for years.

https://twitter.com/100trillionUSD/status/1336274591287799815?s=19

We must hold the bitcoin that we have because we will no longer talk about volatility but about Bitcoin scarcity.

[kaya11]

So does this means that the trading Volume of bitcoin will decrease? If more buyers are just to hold their Bitcoin and no using it at all for it's main purpose then it will not be different from other metals like gold and silver which has low volatilty, and I think it isn't healthy at all in the trading in field.

[odolvlobo]

So does this means that the trading Volume of bitcoin will decrease? If more buyers are just to hold their Bitcoin and no using it at all for it's main purpose then it will not be different from other metals like gold and silver which has low volatilty, and I think it isn't healthy at all in the trading in field.

If adoption grows then there will be increasing trading volume. However, I believe that volume on exchanges will become a small part of that because most people will be trading bitcoins for things other than fiat as the volatility falls.

[sana54210]

In the future when the price becomes even bigger, the volatility will be even less hopefully. It may backfire as well we do not know, maybe it will or maybe it won't but the stats shows that it will be lower.

When bitcoin becomes like 100k for example, most people who bought from these prices currently or even lower would be gone, they would probably cashed out and counting their profits, obviously there could be some holders but since they hold that much, their numbers will be small in the seller numbers. Which means it will require a lot more money to buy and sell, hence I think volatility will be very low as well. Obviously there is a possibility that people could be selling like crazy during that time too, we can't guarantee anything so it could still be high.

[Shasha80]

I was quite surprised to find out that Bitcoin began to experience a volatile drop in the price of Bitcoin compared to previous years.
Maybe now many investors realize that Bitcoin is very good as a safe haven. So there are more people holding Bitcoin for the long term
than using Bitcoin for trading. This indirectly increases the adoption of Bitcoin.

[coolcoinz]

This is to be expected. As the number of coins and their value on the market increases, the volatility decreases. It's a similar situation to adding more sand to an hourglass. The more sand there is the more time will have to pass before it all moves to the other side. With Bitcoin you also have an increasing number of users. The more users you have the longer it will take for them to react to news. When you had all bitcoins in the hands of maybe 1k people (in 2010) a few users could make the price move up and down by 5%. Now you need 100 times more transactions to do the same.

[Alucard1]

I also notice the same way, the volatility of the bitcoin is falling or decreasing time by time, many people get attracted to the bitcoin or cryptocurrency and many people keep on investing especially those whales, I think that one is considered as one factor for this changes. We can also say that the trading volume for the bitcoin decreases also because of the changes in volatility may be because more bitcoin user now prefers investing than trading.

[pixie85]

The volatility is going down because the number of users is going up. Isn't it obvious?

It's easy to make 100 people panic or get hyped at the same time. It takes more time and effort to do the same to a million people. Even harder to do to 10 million.