Volatility IS a bug, not a feature :)

[d5000]

This thread is a response to Volatility is not a bug and also the continuation a short remark I made recently in the Wall Observer but forgot about it.

I firmly believe that volatility in Bitcoin should lower, otherwise Bitcoin will die [1] eventually. It can do this gradually, but the trend should be clear. And until now, the values indeed are decreasing.

Think about a bit which assets are most volatile: Pennystocks and altcoins. To my knowledge no other assets compete with Bitcoin's volatility. And are they sustainable? No. Only a handful of altcoins founded in 2022 or earlier have reached a new ATH since then.

The "attention argument" that ANSEL 2.0 brought up in the other thread, can be debunked simply with the boreout argument.

Let's say Bitcoin continues as volatile as it is. The problem is that upside and downside volatility have evolved in a different manner.

- Downside volatility is only reducing very gradually. From a -90% in the very initial stages, during the last long dips we lost about -80% (-75% to -85% roughly) compared to the last ATH. The differences between the different bear markets were negligible.
- Upside volatility instead is reducing much faster. From more than 100000% in 2011 between the previous low and the ATH of the bubble, the value decreased to 15000% in the 2017 bull, to 2000% in 2021, and finally only 500% in 2025 (if the ATH is in, as it seems).

And it is likely that this continues that way because liquidity increases, there are more early adopters or smart bear market buyers willing to sell when they achieve a few hundreds % of profit.

But that will lead to a situation where Bitcoin will struggle to reach new ATHs. Because it's not that attractive anymore for "gamblers" who want to get rich quick, and it continues to be risky, because the masses still tend to sell at the same time, creating huge crashes. That can lead to a slow boreout, people will get bored of Bitcoin.

Does this mean that Bitcoin's volatility has to be zero? No.

The mathematically controlled Bitcoin supply prevents that Bitcoin will have an extremely low volatility. So fiat-like values are probably impossible.

But it should not be much higher than gold's volatility in "normal times" (not taking into account the 1980s or the 2025/26 bubble).

That can be achieved by behavioral changes in the community: using DCA instead of hoard-and-sell, adopting it as a currency, not believing anymore in "get rich quick" but in "a stable asset which is likely to grow slowly to moderately".


[1] "die" here doesn't mean it will fall to zero. But it is likely that it will be valued much lower than now. Or at least not grow anymore.

[dzungmobile]

Does this mean that Bitcoin's volatility has to be zero? No.

The mathematically controlled Bitcoin supply prevents that Bitcoin will have an extremely low volatility. So fiat-like values are probably impossible.

But it should not be much higher than gold's volatility in "normal times" (not taking into account the 1980s or the 2025/26 bubble).

That can be achieved by behavioral changes in the community: using DCA instead of hoard-and-sell, adopting it as a currency, not believing anymore in "get rich quick" but in "a stable asset which is likely to grow slowly to moderately".

Bitcoin halvings are parts for Bitcoin controlled supply [1], though its effects on the market would become smaller with time when there will be less remaining bitcoins to be gotten from Bitcoin blocks and the more majority of Bitcoin total supply already exists in its circulating supply.

Volatility surely must exist as without it, any market would be very boring, not interesting with investors and traders, so market makers will not join such market too. Consequently, such non-volatile markets would die with time.

[1] https://en.bitcoin.it/wiki/Controlled_supply
[2] Equivalent Network Time.

[rodskee]

Does this mean that Bitcoin's volatility has to be zero? No.

traders are wanting bitcoin to be volatility because this allows for higher profits but a lot of bitcoin users are hoping to use bitcoin for everyday uses and a decreased volatility is what will allow that

[Oshosondy]

Bitcoin volatility is not a bug as it is reducing in each cycle till now, unlike altcoins that you referred to that are completely nothing but gambling.

If bitcoin get to $50000 this time, that is still a reducing volatility in progress as bitcoin did not fall up to how it fell from $69000 back to $15500 in 2022. I believe this year is not going to be like that and that is has it has always been.

[PrivacyG]

Reading your Topic I do not know if we speak the same language or we see things in a different way.  The upside volatility was meant to reduce naturally, we can not have even 2017 levels of percent increases constantly.  We would already be in the quadrillions of Market Cap I believe by now other wise.

As the upside volatility reduces, I believe we will get down to around 100 percent as in doubling every as it should naturally be considering the way its Supply works.  In my view, these incredible upside movement was the Market naturally pricing Bitcoin.  The reduction in volatility was pretty much meant to happen.

Or, is this particularly what you mean to say too?

[KiaKia]

You will have a stable coin if the volatility is removed.

Scarcity meets volatility is the best thing to have happened to Bitcoin, to me it's perfect the way it is.
How will you onboard new investors If volatility isn't present?
How many of the world population are holding Bitcoin? If the high number of today's holder decide to sell it gives room to us who can't buy Bitcoin when it was at $100 each.
Halving and block reward reduction plays a bigger role here too, volatility is what make it make sense.

[PrivacyG]

How many of the world population are holding Bitcoin? If the high number of today's holder decide to sell it gives room to us who can't buy Bitcoin when it was at $100 each.

Realistically.  If Bitcoin dropped to 100 Dollars then almost no body who says today they would buy it would actually keep their word.  It is almost 99.9 percent down from the current price.  By that time, every body would consider Bitcoin probably dead and the only people who remain will be those who hope for it to go higher than that again or people who value the actual product and its utility rather than the Price it sells at.

[Doan9269]

Not everyone that talks about bitcoin volatility truly understands how it works and what to expect form it, being volatile is never a bug, once we know how we could take advantage of the market situation for our own profiting, this is also why it is important that before investment, we are expected to research the market and know the perfect entry point or exit.

The social media narrative is also part of the influence that the market is goin through, because the incidence of breaking news also has it own way of contributing to the volatility of the market, because some tend to instill fear as a result and by so doing make some go into fear of missing out to sell, while doing this may cause the market go more volatile the more, that is why we should not be influenced by the media and also take time to research and speculate the market before taking action upon anything, because the market will always be volatile at each stages of performance.

[Cryptoprincess101]

But that will lead to a situation where Bitcoin will struggle to reach new ATHs. Because it's not that attractive anymore for "gamblers" who want to get rich quick, and it continues to be risky, because the masses still tend to sell at the same time, creating huge crashes. That can lead to a slow boreout, people will get bored of Bitcoin.

This is the area am interested in because bitcoin is not for gamblers or otherwise traders and of course anyone who is investing in bitcoin with the expectation of short-term profits, there is high chances that they will run losses especially if they become unfortunate to buy and the market begins to suffer heavy liquidations from either early investors or those whales who wants to manipulate the market by selling off and cause a heavy fall then buy the DIP to maximize their profits in the long term.
      In summary, for a short-term investor, volatility will become problematic to them but for a long-term investor, it wouldn't be a problem. The market is always busy with buyers and sellers even though sometimes the selling power is much higher than the buyers but still there are also many investors who are expecting the market to be liquidated to that they can have the opportunity to buy bitcoin at a lesser price.
      ATHs are meant to be broken so i don't think that there will be a time when the price of bitcoin will suffer to break previous ATH. Consider when bitcoin was in the early stage, consider how many years it took to get this last ATH then consider the percentage of increase over the years. As it becomes scarcer, not many people will be interested in selling, thereby the market will be sustained and rather than selling, people will struggle to own a share in it considering the level of growth and value it must have gotten. Do not think that because of long term struggles to achieve a new ATH that people will become bored out to invest in bitcoin.

[Betwrong]

~
But it should not be much higher than gold's volatility in "normal times" (not taking into account the 1980s or the 2025/26 bubble).
~

Yeah, that's what I think too. Bitcoin volatility shouldn't be too high, except for the times when it is. You see, even gold can't avoid that, and with Bitcoin it just happens more frequently. I personally don't mind at all. I think it's a feature of Bitcoin, high volatility. I like it. It makes it closer to real things such as love, devotion, feeling of happiness, stuff like that. Those things are also highly volatile.

[stompix]

The mathematically controlled Bitcoin supply prevents that Bitcoin will have an extremely low volatility. So fiat-like values are probably impossible.

Sorry, but I don't get it...
What has the mathematically controlled supply to do with volatility?

You have x demand and y supply, y grows by a known number, meaning that you can always anticipate the ratio of those too, fiat also has a demand, look at the USD for example in the last year, or take a look at the bolivar for the extreme example.
I have no idea and I see no reason why the controlled supply would prevent an extremely low volatility, we had a silver and a gold standard for two millennia with a quasi-controlled supply, as it was pretty hard to mine out of the blue half the supply of silver (till the Spanish conquest of America) and volatility was not a factor whatsoever.

You will have a stable coin if the volatility is removed.
Scarcity meets volatility is the best thing to have happened to Bitcoin, to me it's perfect the way it is.

Try doing business in a world where the currency has this volatility...
When your margins are 2-5%, like in all major industries around here, this volatility would kill 90% of the economy.

[mv1986]

The mathematically controlled Bitcoin supply prevents that Bitcoin will have an extremely low volatility. So fiat-like values are probably impossible.

Sorry, but I don't get it...
What has the mathematically controlled supply to do with volatility?

You have x demand and y supply, y grows by a known number, meaning that you can always anticipate the ratio of those too, fiat also has a demand, look at the USD for example in the last year, or take a look at the bolivar for the extreme example.
I have no idea and I see no reason why the controlled supply would prevent an extremely low volatility, we had a silver and a gold standard for two millennia with a quasi-controlled supply, as it was pretty hard to mine out of the blue half the supply of silver (till the Spanish conquest of America) and volatility was not a factor whatsoever.

I think @stompix has a point here and while I see where @d5000 is coming from, volatility is not a function of fixed supply. Ultimately it's always supply and demand, but sometimes people tend to find other explanations for the supply and demand concept. One example would be when I argue that a much higher market cap will reduce volatility because it is much harder for market participants to quickly move the price. If Bitcoin had $20 trillion market cap, it is pretty likely that the volatility would go down significantly (unless very impactful exogenous or endogenous events take place). But at the end of the day, a much higher market cap is still the result of supply and demand.

What is not possible with Bitcoin though is that the supply side can artificially explode because Captain America says we let the printers run hot. But in general there are clearly economies that have a hell of volatility for their paper money. To the degree that burning it probably offers you more energy than the food you can buy with it.

[Luzin]

Volatility surely must exist as without it, any market would be very boring, not interesting with investors and traders, so market makers will not join such market too. Consequently, such non-volatile markets would die with time.

The market works automatically, fundamentally based on the trust in value. Some buy, some sell, and that's what drives the market. Limited supply also makes the foundation of trust different. The halving period also makes the system work harder, and that automatically increases the costs, which impacts the market price. Bitcoin will not die in the end, even when its supply is fulfilled. Remember the law of Supply and Demand. So as trust continues to grow, the demand will also increase, and hopefully this law will be fulfilled until the end, allowing Bitcoin to keep circulating through trade.

[Fivestar4everMVP]

Does this mean that Bitcoin's volatility has to be zero? No.

The mathematically controlled Bitcoin supply prevents that Bitcoin will have an extremely low volatility. So fiat-like values are probably impossible.

But it should not be much higher than gold's volatility in "normal times" (not taking into account the 1980s or the 2025/26 bubble).

That can be achieved by behavioral changes in the community: using DCA instead of hoard-and-sell, adopting it as a currency, not believing anymore in "get rich quick" but in "a stable asset which is likely to grow slowly to moderately".

I agree with all that you have said here, Bitcoin's volatility has always been a big issue for many people especially those who are have adopted and incorporated the asset into their business as a means of payment, and for those still planning to as well, Ive met business people who accept bitcoin payment and when a customer opt to pay for their service through bitcoin, the customer will be asked to pay a little bit more (usually like $1 or $2 extra) because the business will have to move the bitcoin to an exchange for immediate conversion to a stable coin and the extra $1 or $2 collected will serve as the transfer and exchange fees..
In the end, we discover that a customer who goes through this experience will prefer to pay for the same company's service in fiat when ever they patronize that company because they can't afford playing extra all the time they choose to pay with bitcoin because due to volatility, the company will always immediately convert bitcoin to stable coin to preserve value.

Volatility is really a bug because it has limited the adoption of bitcoin amongst businesses willing to accept it for their goods and services.

[d5000]

How will you onboard new investors If volatility isn't present?

Imagine Bitcoin would be priced at its average price for the last 4 years (200 WMA). It would be an asset with low volatility, but almost constantly growing in value.

Here's a little visualisation (the 200 WMA is the blue line and currently sits just below $60,000):

(Source is the Bitstamp at Bitcoinwisdom).

Wouldn't you invest in that? There are many low volatility assets who are highly demanded, like government bonds.

Halving and block reward reduction plays a bigger role here too, volatility is what make it make sense.

Yes and no. The controlled supply makes volatility more likely because it's not easy to counter a supply imbalance (see below). But halvings don't really have incidence anymore. Miners only make up for ~0.1% of the volume which is sold every day. In the early days halvings did have an incidence, particularly the first halving which erased CPU mining and forced people to buy Bitcoin instead of generating it. But these times are long gone.

I believe we will get down to around 100 percent as in doubling every as it should naturally be considering the way its Supply works.

The last "cycle" was already less than a doubling. And no, the supply doesn't halve at halvings. It's the additional supply mined by miners, which makes up currently (at a 3.125 BTC reward) less than 1% per year. That's a big difference.

In my view, these incredible upside movement was the Market naturally pricing Bitcoin.  The reduction in volatility was pretty much meant to happen.

I agree with these statements. However, if Bitcoin stays as speculative as it is now, there are scenarios where the volatility could stay high, but mostly to the downside. As I said in the OP, I can imagine a scenario like current's ETH price evolution, which seems to not anymore reach new ATHs (last ETH ATH was in 2021) but instead fluctuate 80-90% between high and low. That can of course work for a while due to traders keeping the market afloat. But it would eventually lead probably to an even further price reduction when the hope of a long term price increase begins to fade away and more and more investors leave the boat.

A Bitcoin with positive price evolution or at least stability, and low volatility would be much more attractive both as an investment and as a currency.

You have x demand and y supply, y grows by a known number, meaning that you can always anticipate the ratio of those too, fiat also has a demand, look at the USD for example in the last year, or take a look at the bolivar for the extreme example.[...]
I have no idea and I see no reason why the controlled supply would prevent an extremely low volatility, we had a silver and a gold standard for two millennia with a quasi-controlled supply, as it was pretty hard to mine out of the blue half the supply of silver (till the Spanish conquest of America) and volatility was not a factor whatsoever.

Perhaps you're correct here. I think still gold and silver have more supply flexibility, as with rising prices new mining techniques are developed and supply can grow faster. This can't happen with Bitcoin, so if there is any systemic demand surplus (or reduction) then the price will eventually react, and often harshly due to market overreactions (FOMO/panic/liquidations to both sides).

But I'm at least convinced that Bitcoin's volatility can lower to the volatility values of a currency with a 15-30% fluctuation over the year, like the Brazilian Real or the Indian Rupee.

[Cryptomultiplier]

I don't think volatility is any between a bug or a feature, because your strategy of investment, your risk tolerance and the timeline you are in matters most to notice the kind of effect you would have.
Volatility could actually be a risk factor which can influence one to be forced to sell, still, it is more a feature of human psychology and reasoning, rather than a mere bug in the system.

Volatility could have a major effect on someone who has a fixed income like a salary earner, whereas to an investor who is holding and accumulating more BTC in the seasons, it is what creates the returns overtime that often amount to much upon liquidity or diversification.

[rat03gopoh]

Volatility is a feature or characteristic inherent in anything created with a limited supply and economic value.

To deny this is like expecting Bitcoin won't be freely adopted or used. The same applies to any entity. When I set a limited supply and allow its use to be publicly and unconditionally permitted, I must let people compete to acquire it with their best efforts; then I know that will lead to volatility.
A simple contradiction is the Bitcoin testnet (unlimited supply), whose use is limited only to testing purposes. They lack volatility.

[aoluain]

The notion of Volatility being a bug would be something if it was directly linked to the Bitcoin code
or infrastructure but its linked directly to human emotion and to a lesser amount to Bitcoins supply.

Those seasoned traders who are able to buy low and sell high - repeatedly would definitely call the
volatility a feature I would say.

[BlackHatCoiner]

But it should not be much higher than gold's volatility in "normal times" (not taking into account the 1980s or the 2025/26 bubble).

I'm just reminding you that gold is one of the most liquid assets with more than $150 billion daily trading volume. Bitcoin's daily trading volume is around one tenth of that. The volatility is therefore very justified, as the market structure is orders of magnitude deeper in gold.

Volatility is not a bug. It is the natural behavior in the asymmetry of an apex predator asset.

[Churchillvv]

We seem to have affected bitcoin volatility to an extent that I seem like in years coming bitcoin might slow down in terms of the attention that it’s getting and the attentions it got before now. To buttress, the volatility is over going to be a bug even though you might try to justify that the change in volatility from the 2017 and 2022 market behavior and 2025/2026, I can definitely agree that a lot of changes happened that are very questionable but the rate at which bitcoin price went up and the way it has been heading downward in my opinion is quite complementing each other.

But how it goes up and down is not a bug, people might have gotten used to bitcoin previous patterns but in today’s world it seem to have shifted, maybe we need to adjust too.