Is Bitcoin is too volatile? Bitcoin VS Netflix, Apple, FB, PayPal, ..etc

[hugeblack]

 People say "Don’t invest in Bitcoin, it is too volatile!" but is this saying true?
I will quote you some parts of this article in which the volatility of Bitcoin was compared with some stocks.

 Source ---> https://ecoinometrics.substack.com/p/ecoinometrics-bitcoin-is-too-volatile?s=r

Before start lets define:

 - A drawdown is the correction period that happens between two consecutive all-time high.
 - The size of a drawdown is the distance in percentage between the all-time high and the lowest point of the correction.
 - The duration of a drawdown is the number of days it took for the asset to make a new all-time high.

Honestly the patterns aren’t so different. Yes, for shorter durations Bitcoin tends to see larger dips (the orange points tend to be below the blue points). But that’s not necessarily a bad thing. Basically that tells us that Bitcoin can recover faster from those kind of drops.

And how many times have commentators declared Bitcoin dead after a -70% correction? Well a stock like Netflix has a bunch of these too. Still they survived until now (that’s 20 years).

Damn! In its long history Apple has had a bunch of very significant drawdowns often taking longer than Bitcoin to recover from dips of similar size.

Source and Readmore ----> https://ecoinometrics.substack.com/p/ecoinometrics-bitcoin-is-too-volatile?s=r

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[LeGaulois]

The difference that makes it so it can't really be compared:

- Companies quoted have an established potential and tracking records.
- Bitcoin is still in a 'skeptical' phase. So the risk is considered higher (and it's true) because people are not yet convinced
- The volatility of a share company provides lesser risks than the volatility of a virtual currency (not highly adopted, not really framed) that people still see as a UFO coming from nowhere.

Don't get me wrong, there is no harm in investing in a volatile market but it's all about splitting your portfolio. A  wise way to do it is for example to split:

- 15% of your funds in a store of value
- 15% in the real estate
- 50% in a market considered with a medium risk
- 20% in a high-risk market (either because it can be too volatile, the market is 'not so sure', etc)

I'm not giving a strict percentage to follow but it's just to show how people should balance the risk/profit ratio. If I have only $1000 left and want to invest I would rather invest the amount in a company like Amazon rather than in a cryptocurrency.

[jackg]

Based on the graphs I think it looks more volatile than all but tesla but I don't think there's much in it (except when compared with Netflix maybe - it did have higher drawdowns for shorter periods and a mean curve through it would make it look quite a bit higher in volatility).

I think volatile should've become speculative at some point. The warnings of it having high volatility persisted from the 2013-2015 period imo as it was still new - any investor who mentions it's highly volatile now is suffering from not realising markets are dynamic and adaptive (much like the economy).

[kryptqnick]

Op is making a good point that Bitcoin is not that volatile compared to some major, highly reputable stocks. I think that volatility is actually more of a struggle when it comes to viewing Bitcoin as money rather than as an investment. After all, most people aren't stock investors, and nobody's paying for groceries with Netflix or Tesla stocks. And if Bitcoin is money, it's compared with fiat which, while constantly losing value, normally does it as a very stable rate which is well below what can happen to Bitcoin in a matter of a year. Also, in terms of Bitcoin as an investment, I think LeGaulois  is right that reputation matters to many, and all those companies have big names and many contracts behind them, whereas Bitcoin does not.

[mk4]

The difference is that these companies' stocks dropped A LOT mostly because of fundamental reasons — they're been performing like crap in paper(may it be because of net income/revenues/etc). Whereas bitcoin is far more market inefficient and retail "investor" infested, which can be either a good thing or a bad thing depending on how you look at it.

[Upgrade00]

The important point for me is how it was pointed out that bitcoin's volatility is reducing which is evident in the market. Bitcoin was significantly more volatile years ago than it is now, and would most likely be less volatile years from now.

People say "Don’t invest in Bitcoin, it is too volatile!" but is this saying true?

If people don't want to invest in Bitcoin cause they believe it is too volatile, then they can. Doesn't matter if it's not as volatile when compared to some other stocks or there's a general bias. People should make decisions based on what they believe of the market, with the information available to them.

[NeuroticFish]

People say "Don’t invest in Bitcoin, it is too volatile!" but is this saying true?

Interesting charts, but some people will also probably point fingers to historical charts, showing that in the previous cycle it has dropped from almost 20k to some 3k.
And we're in the middle of a cycle, it still can go lower, although I hope it won't. Everything seems to look better for now than in the previous cycle, but I'd still wait until the halving to make sure we're good.
Then we'll see for sure if you've made an unfair comparison or the things finally start looking better for Bitcoin than for stocks even for short term (for 4 years they're looking great anyway).
Of course, we all know that overall volatility keeps decreasing, we all know (I hope) that we are heading towards that (smaller volatility than stocks), still, I didn't know we're so close (or even winning already).

[mk4]

If people don't want to invest in Bitcoin cause they believe it is too volatile, then they can. Doesn't matter if it's not as volatile when compared to some other stocks or there's a general bias. People should make decisions based on what they believe of the market, with the information available to them.

Yea, this. While bitcoin is great and is a good investment(at least in my opinion, obviously), it's not some magical thing that is sole path to riches. Anyone could easily heavily outperform a typical bitcoin hodler by creating a decent business with great cashflow. Or heck, even with just being good at stocks.

[Synchronice]

People say "Don’t invest in Bitcoin, it is too volatile!" but is this saying true?

Don't listen to people, they know nothing. If they were right, then there wouldn't be such tragic wealth equality in the world, keep in mind that the top 1% owns more than 1/3 of the world's wealth.

People have been saying don't invest in bitcoin since I remember, you could hear that from the very beginning, people were saying that when the price was $1, $100, $1000, $10,000 and they are saying that today too. What's volatile? The fact that the price of bitcoin went from $1 to $68 000? Where do these people suggest investing? In real estate? In gold? In stocks? To make riches richer? Just where? Cryptocurrencies gave poor people opportunities never seen before.


See this picture, bitcoin is volatile but why do you care about day traders when you are a long-term investor? If you are a day trader, then I assume you don't analyze the risks.

[ShowOff]

Bitcoin is a relatively new investment asset, probably not worth it when compared to some big company stocks based on most people's sentiments. I'm not too sure I will enjoy higher volatility in the future especially if adoption becomes more and more as adoption will only push bitcoin volatility lower.

We cannot expect things to remain unchanged over time as there is always hope for bitcoin to be better in the future compared to the stock asset being compared especially regarding its volatility. This will only give the impression that bitcoin has a good place among investors who believe that it is not too bad to consider in their portfolio.

[Hydrogen]

A case could be made for bitcoin's volatility decreasing.

While there were massive fluctuations in btc price in past years when forks were announced. When other news headlines hit. These price fluctuations appear to be shrinking over time.

Bitcoin's long term chart could more closely resemble gold, silver and precious metals. Than bitcoin's early era when it was a less known asset, and people weren't certain how it would respond to different market conditions.

[Wakate]

People say "Don’t invest in Bitcoin, it is too volatile!" but is this saying true?

This is a big question we all need to look into so we can get more clearer view o what we meant by volatile and how we can consider what financial asset is volatile and those ones that are less volatile. Volatility is the rate of fluctuate of price during a certain period of time. The time that price takes to move from one point to another is the volatility.

We can say;

Volatility=price fluctuation/time interval

Rough calculation[based on my calculative perspective]

Example: If Bitcoin falls at a price of 69k to 38k and lasted for 180 days before it retain the previous high, what's the average volatility of Bitcoin?

Price fluctuation= Previous Height/ higher high - Currently low/Lower low
Price Fluctuation=69K - 38K = 31k
Time interval= 180
Price fluctuation= 31,000/180
                              =172
So, it means Bitcoin had fluctuated at an average time of 172 times before it attained a new height.

So how can we compare if Bitcoin is more volatile than other financial assets like Facebook, Apple, Netflix etc because many new or less knowledgeable investors do complain that Bitcoin is very volatile which is the reason why they don't consider it a perfect investment. Does it mean that other assets are not volatile too?

This image really shows the difference between Bitcoin and other assets' volatility and it almost looks similar. To calculate volatility, then one need to look at two factors;
How deep the drawdown goes.
How long it lasted.
These two factors are very important in checking the volatility of a financial instrument.

[Lucius]

People say "Don’t invest in Bitcoin, it is too volatile!" but is this saying true?

There is no doubt that this is true, we all know it and it is a fact from which we cannot escape. But on the other hand, stocks are also volatile and serious investors like the old master Buffett lose several billion dollars in just one night, which is not strange.

In the context of Bitcoin vs. stocks, we need to consider that the average investor understands investing in gold or stocks much better than something like Bitcoin. When we look at all the famous world faces who have a negative or restrained attitude towards Bitcoin, then it is quite clear that their opinion is largely reflected in the general population.

If we add that investing in stocks is relatively simple, all you need is a broker and money - while for Bitcoin you still need to understand some things, which is a big obstacle for many. The argument that Bitcoin is volatile stands, but that's not why people prefer stocks, gold, or real estate - the excuse is in the end just an excuse, and in this case a very bad excuse that stems from ignorance, fear, and the influence of the mainstream media.

[Johnyz]

Volatility are more high for Bitcoin because this market works 24/7 compare to the stock market which is usually close during weekend. There's no huge difference honestly, those stocks companies are also volatile and actually they are more prone to manipulation which I think is more risky compare to its volatility. If you're into Bitcoin that's a good decision, but of course diversification is also a good strategy, those big companies mentioned in OP are one of the stocks to buy right now, just consider its stock price before buying.

[Flexystar]

It’s like comparing Centralised Vs. decentralised assets. Pretty much obvious from the graph how liquidity is getting affected for bitcoin due to its free nature. There is no guarantee how much liquidity will be available in the pool for today and tomorrow. If checked correctly the calculation could go down to volumes traded at any given hour. It’s constantly changing. However in centralised nature most of the companies shares and stocks are secured by investor relations and companies board of directors. So many things goes into these two type of assets and that’s how they behave on those graphs.

[Kakmakr]

Let's be honest..... the last 200 days was actually very boring with the Bitcoin price volatility. I think the issue come in prior to this period, when we saw huge drops in the price from the all-time-high in the $60k range. 

When Bitcoin's price behave like any other Commodity, nobody says anything.... but the moment when there are huge corrections... people bring out the pitchforks.   

I think what we can say is that the price corrections are becoming less extreme now, because speculators in the markets has become used to Bitcoin's price fluctuations and they are not dumping every time when there are a 10% drop in the price. 

[hatshepsut93]

Why is Bitcoin compared to stocks? Bitcoin is a currency, not a stock. Do a comparison against currencies, and you will see just how volatile it is.

And this short-term volatility is a huge problem for practical uses of Bitcoin. Merchants would have to constantly update prices in Bitcoin, they would have risks of sustaining losses due to volatility - receiving BTC while its high and then having to spend it while it's low. And this doesn't affect only merchants, it affects anyone who receives Bitcoin, including workers who get salaries or governments that collect taxes. And the usual argument to "just HODL" doesn't work here, because there's a lot of situations when payments must happen here and now.

[crzy]

It’s like comparing Centralised Vs. decentralised assets. Pretty much obvious from the graph how liquidity is getting affected for bitcoin due to its free nature. There is no guarantee how much liquidity will be available in the pool for today and tomorrow. If checked correctly the calculation could go down to volumes traded at any given hour. It’s constantly changing. However in centralised nature most of the companies shares and stocks are secured by investor relations and companies board of directors. So many things goes into these two type of assets and that’s how they behave on those graphs.

Probably in stocks they are playing by the books and while in Bitcoin, its pure speculation and of course a hype or a fud affects the price of Bitcoin. This may not be a good comparison but as we can see on the trend, the whole market is indeed on a down trend right now, maybe because of the global crisis that is on-going on many countries, the volatility are also based on the economic situation. Bitcoin is too volatile but it doesn’t mean stocks are more safer, you still need to analyze.

[Scripture]

There's no big difference with regards to its volatility, stocks most of the time are less volatile, they are just moving if there's a big updates or big news about the economy that could affect their industry. I think its better to compare here the FOREX vs Bitcoin because that's a currency and you can really see real volatility there. You can take advantage of this volatility if you have a good strategy that can work with that trend, just stay focus.

[adaseb]

Reason why these large cap companies are getting these nasty 20-30% dumps in a single day is due to a higher than normal volatility which results in lower liquidity.

Generally when VIX index is high, it means lots of volatility, and in return it has less liquidity. Coupled with the fact that many people mostly retail bought all these stocks on leverage, it caused a cascading liquidation event, similar to crypto.

Another reason is they were overvalued to begin with. Their PE ratio was very high and this is not surprising. A few more weeks and it’s a good area to long.