Volatility of bitcoin

[Patikno]

Bitcoin being  volatile  is  not  only  an hinderance and uncertainty in trading it also gives opportunities  for  enhancing and adoption of new strategies. But how exactly  is bitcoin  volatile.  I know what volatility  means but i still don't  understand  the reason  why price is not stable and why its not like othe pegged  coins.

When it comes to volatility, gold is also volatile, and that is why some brokers provide platforms for traders to capitalize on it to bet.

Essentially, volatility is heavily influenced by market supply and demand for an asset, whether it is Bitcoin, gold, silver, or something else. Furthermore, good or bad news also serves as an indicator of supply and demand, thus causing volatility. However, Bitcoin and gold are considered safe to hold in the long term, but, short-term trading is highly risky, as it can lead to losses. By the way, other pegged coins may appear stable, but over the long term, their "purchasing power" decreases, or weakens, and that is why we see various commodities experience price increases over time. Essentially, we should use pegged coins for the short term, and prefer Bitcoin, or gold for the long term. Personally, I prefer Bitcoin over gold due to the significant difference in scarcity. Cmiiw.

[brownn]

Bitcoin being  volatile  is  not  only  an hinderance and uncertainty in trading it also gives opportunities  for  enhancing and adoption of new strategies. But how exactly  is bitcoin  volatile.  I know what volatility  means but i still don't  understand  the reason  why price is not stable and why its not like othe pegged  coins.

It was more volatile earlier. Now the volatility is reducing because adoption is increasing at very fast rate. Even the big institutions who are holding large amount of bitcoins, do not want to sell their bitcoins because they expect it to be very valuable in future.

[retreat]

Volatility is related to supply and demand. Because the Bitcoin market is currently smaller than traditional markets like stocks or other currencies, short-term speculation can cause the price to fluctuate drastically, especially when news or regulatory changes affect market sentiment.

However, Bitcoin's volatility isn't permanent. It can decrease if Bitcoin experiences significant growth, particularly if demand continues to rise and global adoption expands. This will gradually reduce volatility as more people hold it and Bitcoin's market cap becomes much larger, making short-term price speculation less significant in terms of overall price impact and make prices more stable.

[Royal Cap]

Bitcoin being  volatile  is  not  only  an hinderance and uncertainty in trading it also gives opportunities  for  enhancing and adoption of new strategies. But how exactly  is bitcoin  volatile.  I know what volatility  means but i still don't  understand  the reason  why price is not stable and why its not like othe pegged  coins.

In my opinion the real reason for Bitcoin's volatility is that no one controls it. No government or no company. That is no one can keep the price at bay. Only supply and demand determine the price in the market and since people's sentiment changes very quickly, the price also jumps accordingly.

Another big thing is that pegged coins have clear support behind them, such as a dollar reserve, they deliberately keep the price stable. Bitcoin has no backup, no one says that the price will be at this price today. So it's all about who wants to buy or sell at what price in the free market, my personal opinion is that Bitcoin's identity lies in its volatility. It is risky but that risk makes people think, makes them look for opportunities.

[Dunamisx]

But how exactly  is bitcoin  volatile.  I know what volatility  means but i still don't  understand  the reason  why price is not stable and why its not like othe pegged  coins.

When we talk about market index, there's more to it relation to economics, not only bitcoin is a volatile market, we have others assets too that are volatile, even though they may not be as bitcoin, taking gold for instance, over the years, even before bitcoin was introduced, it has been volatile and profitable, this is just a math of the demand and supply rate, which makes the market rise or fall depending on which is more higher, as some will be selling, others are willing to buy and hold, the market remain ever demanding and increases in value with time.

[AprilioMP]

Bitcoin being  volatile  is  not  only  an hinderance and uncertainty in trading it also gives opportunities  for  enhancing and adoption of new strategies. But how exactly  is bitcoin  volatile.  I know what volatility  means but i still don't  understand  the reason  why price is not stable and why its not like othe pegged  coins.

That's because of the law of supply and demand.
The explanation of this theory is the answer to why Bitcoin's price is not as stable as other pegged coins.
When sales are high, the output is that demand weakens so prices can be lower than usual. If it were the opposite, then prices could soar high in a matter of hours. That's where the strategy comes into play, when high sales numbers result in low prices, investors can take advantage of it to buy. That's the most basic thing.

[Hewlet]

  I know what volatility  means but i still don't  understand  the reason  why price is not stable and why its not like othe pegged  coins.

If you know what volatility is and particularly understand what bitcoin volatility entails, you shouldn't be asking why the price of bitcoin is not stable. To a reasonable extent, it's not even completely false if I assert that the price of all the commodity we are purchasing is volatile. The degree of volatility might differ with most of the physical item being more regid than a digital assets in the crypto class but a simple understanding of what causes a change in the price of commodity tells on what's responsible for a change in the price of bitcoin relative to time and circumstances.

The effect of it fixed supply in relation to the regular buys and sells a d buys and sells in multiple folds that happens at the same time are primarily the course of bitcoin volatility. Other factors that are evidence like institutional adoption and other things of Thier class all joins to contribute to the volatility of bitcoin. You can always do your research or do a little search on the forum and you get loads of information that gives you better insight into what bitcoin volatility is about.

[OsaiEmma]

Bitcoin being  volatile  is  not  only  an hinderance and uncertainty in trading it also gives opportunities  for  enhancing and adoption of new strategies. But how exactly  is bitcoin  volatile.  I know what volatility  means but i still don't  understand  the reason  why price is not stable and why its not like othe pegged  coins.

If the price is pegged, then the underlined reason for Bitcoin will be broken, it is an asset that have good mechanism to combat inflation of the coin and also provide scarcity, this gives rise to a strong implementation of the law of demand and supply, in as much as this mechanism exists, it will be difficult to have a fixed price

[Danica22]

Price of Bitcoin is unstable since, as opposed to steady coins, which are tied to real US dollar, BTC is not tied to anything and its value simply moves according to desire of people to pay in new market. Its main reason for instability is that its supply is fixed and rare, having just 21 million coins, so any small change in number of people who want to buy or sell it results in huge and sudden price rise. News and market excitement and big trades by large investors can also easily change price, as market is still smaller than others. And new government rules can lead to instant, hard to guess changes. Simply put, Bitcoin is unstable, as it is rare thing in new market with strong feelings, where rules are not backed by government promises but by code.

Supply scarcity is just one small factor that contributes to bitcoin's volatility. Bitcoin's volatility is largely due to the fact that people consider it a speculative asset, and they speculate on it with the aim of making quick profits. Additionally, volatility is also caused by manipulation by market makers, whales or even politicians.

Supply is not the deciding factor, which is why as bitcoin matures, volatility will decrease. The bigger Bitcoin gets, the harder it is to manipulate, and sooner or later, Bitcoin will become less volatile and more like gold as its capitalization increases.

[DZHLWK]

Bitcoin’s volatility is basically the price of having an open, global, 24/7 market with no central bank behind it. Liquidity is still smaller than in traditional markets, sentiment changes fast, and a lot of short-term traders (sometimes using leverage) react to every headline. All of that makes moves both up and down much more dramatic than in most other assets.

From my view, including what I follow on platforms like DZHLWK, the key is accepting that big swings are normal, not an exception. If someone chooses to hold or trade bitcoin, position size and risk management matter more than trying to guess every move: only use money you can afford to lose, don’t over-leverage, and be honest about your time horizon and tolerance for drawdowns. Volatility is not “good” or “bad” by itself, but it can be brutal if your strategy doesn’t match your nerves.

[FortuneFollower]

Bitcoin being  volatile  is  not  only  an hinderance and uncertainty in trading it also gives opportunities  for  enhancing and adoption of new strategies. But how exactly  is bitcoin  volatile.  I know what volatility  means but i still don't  understand  the reason  why price is not stable and why its not like othe pegged  coins.

If the price is pegged, then the underlined reason for Bitcoin will be broken, it is an asset that have good mechanism to combat inflation of the coin and also provide scarcity, this gives rise to a strong implementation of the law of demand and supply, in as much as this mechanism exists, it will be difficult to have a fixed price

Bitcoin isn't pegged to anything because it doesn't need to.

It's the first coin and it doesn't rely on anybody to go through with its price, only on what it provides - Freedom and security.

[Kelward]

Volatility of Bitcoin means that it's price is not constant, it can change at anytime, either it goes up or it comes down and what dictates where it stands at any point is demand and supply. You can apply simple economics principle to know exactly how demand and supply impacts price. If supply is greater than demand price will fall because there will be excess Bitcoin in the market, on the other hand if demand is greater than supply price will increase because more investors are pursuing limited supply in the market. When demand and supply are at the same level we will have equilibrium price but it doesn't last, either demand or supply will increase and that is why we say Bitcoin is volatile.

[colinistheman]

Volatility is related to supply and demand. Because the Bitcoin market is currently smaller than traditional markets like stocks or other currencies, short-term speculation can cause the price to fluctuate drastically, especially when news or regulatory changes affect market sentiment.

However, Bitcoin's volatility isn't permanent. It can decrease if Bitcoin experiences significant growth, particularly if demand continues to rise and global adoption expands. This will gradually reduce volatility as more people hold it and Bitcoin's market cap becomes much larger, making short-term price speculation less significant in terms of overall price impact and make prices more stable.

Yes, bitcoin volatility is not permanent and in fact, it is decreasing over time. If we compare the declines in each bear market, we will see that volatility is decreasing with each cycle. During the 2018 bear market cycle, bitcoin fell sharply and lost more than 83% of its value, but by 2022, it had only fallen about 73%. I believe that in the upcoming bear market, bitcoin's drop will definitely be lower than 73%.
It is clear that if adoption increases and demand for bitcoin increases then bitcoin will become more mature. At some point, it will become less volatile.

[nemesis_incarnate]

Volatility of Bitcoin means that it's price is not constant, it can change at anytime, either it goes up or it comes down and what dictates where it stands at any point is demand and supply. You can apply simple economics principle to know exactly how demand and supply impacts price. If supply is greater than demand price will fall because there will be excess Bitcoin in the market, on the other hand if demand is greater than supply price will increase because more investors are pursuing limited supply in the market. When demand and supply are at the same level we will have equilibrium price but it doesn't last, either demand or supply will increase and that is why we say Bitcoin is volatile.

And not all markets are the same, there are different volumes of BTC everywhere, however, it's plus-minus the same on CEXes especially..

[Satofan44]

Historically this is true. But think a little bit deeper about that.

Of course volatility is what makes some "crypto" attractive. But this is mostly true for shitcoins, and it's their only reason to exist.

People who believe that volatility is a reason to invest into Bitcoin or that this is what makes it attractive to potential investors are as clueless as they get. I have never heard of a single person who bought it for this reason, therefore this argument is not true for Bitcoin at all. For shitcoins, yes.

Now: the general altcoin market has been declining in the last years (since 2017 approximately, when altcoin market reached "maturity" first time) if we observe Bitcoin dominance. Most altcoins experience a single pump and then never reach their ATH again. Even ETH has failed (by few USD!) to hit a new ATH in 2025.

This has a reason: The altcoin market benefitted a lot at first from the narrative "you can get rich if you invest in the next Bitcoin!". Well, turned out there was no next Bitcoin. Thus this narrative is weakening year by year, and that's also why altcoin seasons are also much weaker than they were. In each season, there are disappointed bagholders left, and they will probably never touch altcoins again if their losses were too big.

I would not rush ahead to conclude this so fast. The last altcoin season was insane, and perhaps you could find some examples where it seems weaker than the season before it but overall it was stronger. Now the case since then looks quite different and with each passing day the hopes regarding an altcoin season are dying. I would wait for at least 1 more year before we should speculate on whether this thesis holds. This cycle is actually different from everything before (contrary to many skeptics which use fallacies to justify that it is not, such as "people said the same in the last cycle"), therefore it may have still have some surprises in store. Nevertheless, I look forward to the collapse of most altcoins as they are scams. Realistically, we need less than 100 blockchains to cover all possible use cases which include many specialized chains. For general-purpose chains, we don't need more than a couple.

For further growth beyond "speculative use" we need a perspective for a more reliable store of value or "currency unit". And that means lower volatility.

This will breed a new generation of whiners that complain that it is too stable.

Volatility of Bitcoin means that it's price is not constant, it can change at anytime, either it goes up or it comes down and what dictates where it stands at any point is demand and supply. You can apply simple economics principle to know exactly how demand and supply impacts price. If supply is greater than demand price will fall because there will be excess Bitcoin in the market, on the other hand if demand is greater than supply price will increase because more investors are pursuing limited supply in the market. When demand and supply are at the same level we will have equilibrium price but it doesn't last, either demand or supply will increase and that is why we say Bitcoin is volatile.

You just rephrased a generic definition of what volatility is and how supply and demand determines the price.  

[Mahiyammahi]

Bitcoin being  volatile  is  not  only  an hinderance and uncertainty in trading it also gives opportunities  for  enhancing and adoption of new strategies. But how exactly  is bitcoin  volatile.  I know what volatility  means but i still don't  understand  the reason  why price is not stable and why its not like othe pegged  coins.

Bitcoin is volatile cause its not pegged to anything. Pegged coins such as stablecoins maintain their price with a dollar reserve/algorithm within  it. So fluctuations are pretty low. The price of Bitcoin is entirely depends on market demand and supply.  A little more buying and selling can cause a price shock, because the market is still relatively small and liquidity is not the same everywhere. On top of that, there is 24/7 trading, news/regulation/macro economy/large orders from whales all of which have a quick effect. Because of leverage trading, even small moves result in cascade liquidations, increasing volatility. So it is not stable but precisely this free floating nature also provides opportunities towards all traders. 

[Franklyn-wood]

But how exactly  is bitcoin  volatile.  I know what volatility  means but i still don't  understand  the reason  why price is not stable and why its not like othe pegged  coins.

When we talk about market index, there's more to it relation to economics, not only bitcoin is a volatile market, we have others assets too that are volatile, even though they may not be as bitcoin, taking gold for instance, over the years, even before bitcoin was introduced, it has been volatile and profitable, this is just a math of the demand and supply rate, which makes the market rise or fall depending on which is more higher, as some will be selling, others are willing to buy and hold, the market remain ever demanding and increases in value with time.

Bitcoin is not as volatile as gold and people are investing in it because of the price and how they can make quick money from their investments. Gold has been known as one of the the volatile asset with Bitcoin and this has made investors not to waste time investing in it simultaneously. Bitcoin have to be volatile so it does not look like the stable coins we used to know.

Any time Bitcoin stop being volatile, people are going to lose money because their that are waiting for the price of Bitcoin to appreciate so that they can take profit will end up with loses due to the stagant market. The difference in the price of Bitcoin is what people are looking for and that will what determine if you are going to be making profits from your investments of you are going to say goodbye finally.

[Rabata]

Bitcoin being  volatile  is  not  only  an hinderance and uncertainty in trading it also gives opportunities  for  enhancing and adoption of new strategies. But how exactly  is bitcoin  volatile.  I know what volatility  means but i still don't  understand  the reason  why price is not stable and why its not like othe pegged  coins.

Volatility is very common because the price depends on its demand. Many times it is seen that the price of Bitcoin is increasing and sometimes its price is decreasing. Due to the limited supply, the buying pressure of investors often increases, which at one point increases the price of the coin in a large scale. Sometimes, when there is various types of negative news, the selling pressure increases, which reduces its demand, due to which the price is slightly downward. But there are many investors who have been accumulating Bitcoin for a long time. They are regularly increasing their holdings of Bitcoin. Again, sometimes the pressure from institutional investors increases, due to which it becomes expensive again. This will continue. Its price will continue to rise and fall on demand.

[BLEIOT]

Bitcoin being  volatile  is  not  only  an hinderance and uncertainty in trading it also gives opportunities  for  enhancing and adoption of new strategies. But how exactly  is bitcoin  volatile.  I know what volatility  means but i still don't  understand  the reason  why price is not stable and why its not like othe pegged  coins.

Bitcoin is also volatile because a big part of the supply is held by large players — early adopters, funds, OTC desks and big mining pools. When they move coins or rebalance, it can shake the market simply because the liquidity isn’t huge. Mining pools like Foundry, Antpool, ViaBTC etc. control large flows, and any big on-chain movement from such wallets can affect sentiment. It’s not manipulation, just the reality of a market with a limited supply.

Another thing is the mining cycles. When network difficulty gets too high, some miners turn off or reshuffle hardware, and this also adds instability. During these periods smaller or online-focused pools might not be very motivated to keep 100% of the hash rate active, and price drops often happen around the same time. It doesn’t mean someone is forcing the price down — it’s just how the mining economy reacts when difficulty and costs spike.

And of course, there’s also the simple economic point: there’s no reason to overpay for blocks or power when some contracts for hardware were bought near the peak — you can guess the rest yourself.

[d5000]

People who believe that volatility is a reason to invest into Bitcoin or that this is what makes it attractive to potential investors are as clueless as they get. I have never heard of a single person who bought it for this reason, therefore this argument is not true for Bitcoin at all. For shitcoins, yes.

Well, a few years ago this belief was a bit more widespread. I remember even some high profile Bitcoiners (Poelstra? it seems to have been Erik Voorhees) have argumented that Bitcoin has to be volatile to attract people. But this is a thing of the past now. That phase has ended as many people know what Bitcoin is and (rudimentarily) how it works. Even people among my acquaintances I never suspected now know about Bitcoin, and thus we don't need more "attention" with more bubbles. We need to prove now that Bitcoin has intrinsic value and that it can bring humanity forward.

I would not rush ahead to conclude this so fast. The last altcoin season was insane, and perhaps you could find some examples where it seems weaker than the season before it but overall it was stronger.

Mainly I refer to Bitcoin dominance fluctuations. I just re-checked BTC.D: in the 2017/18 altseason, the Bitcoin dominance fell from 95% (!) to 37%, in 2021 from 71% to 40%, and the current little "season" only managed us to bring down the dominance from 65% to 58%.

In absolute numbers of course the last seasons were stronger. We have currently an altcoin market cap of 1.5T, at the height of the season it was about 1.8T, even if Bitcoin was even stronger at almost 2.5T. The "differential" in comparison to the "altcoin winter" was however only about 400B (alt market cap was already at least around 1.3-1.4T at the Bitcoin dominance peak of 65%). In 2021, Bitcoin was at ~$50k, this would make up to an 1T marketcap, and thus altcoins at the height of the season may have had around 1.5T, with a "differential" of about 700B. While in 2017/18, with a Bitcoin at about $7-13k (15-20k peak lasted only a few weeks), in the best case we had a 350B Bitcoin marketcap and a 500B altcoin marketcap, but that 500B came from "almost nothing".

So you're correct, the altcoin market cap has become a little bit bigger even in comparison to 2021, but not by much (the Bitcoin market cap has grown much more) and there are much more competitors, memecoins, NFTs, "Offficial Trump" and other private money printing machines, and so on. So the chance to get rich with some altcoins is now very likely actually lower. And I expect this tendency to continue.

This cycle is actually different from everything before (contrary to many skeptics which use fallacies to justify that it is not, such as "people said the same in the last cycle"), therefore it may have still have some surprises in store. Nevertheless, I look forward to the collapse of most altcoins as they are scams. Realistically, we need less than 100 blockchains to cover all possible use cases which include many specialized chains. For general-purpose chains, we don't need more than a couple.

Agree here, it is at least possible that we see a stronger alt season still. Perhaps the Zcash rally a few weeks ago hints to that. But I think in terms of dominance, the tendency is already very clear, and I think also the logic I cited, that bagholders hurt the altcoin market, should be solid.

What I consider possible (not super-likely, but perhaps >20% probability) is a strong altcoin season led by solid, decentralized coins like Monero where no "dev team" will dump shitloads of premined coins. In fact I expected this already some time ago, but until now I was wrong. The good Monero performance despite of the delistings is however a hint that this is still possible. These coins could indeed establish themselves as complementary cryptos to Bitcoin, with similar value propositions, but probably even then they wouldn't put Bitcoin's leadership in danger. And their volatility should also lower in this case (Monero is already close to Bitcoin actually, even deep crashes only lose 80%, not 95% like in most altcoins).

This will breed a new generation of whiners that complain that it is too stable.

Yes, they are already appearing - those complaining that it "has less ROI than gold" and so, even if this is only true for short timeframes.

But this is also a hint that for me it is time that the Bitcoin community thinks about a post-speculation Bitcoin ecosystem. I think there's reasons to be optimistic, but it still can go wrong.