Bitcoin volatility plunges below Tesla, Nvidia stocks amid $100K price prediction
Bitcoin's volatility in the annual timeframe has dropped below that of top tech stocks, including Tesla, Meta, and Nvidia, signaling its growth toward becoming a more mature and stable asset class.
Bitcoin becomes more stable than many SP 500 stocks
As of May 11, Bitcoin's 1-year realized volatility, which represents the standard deviation of returns from the mean return of a market, was at around 44.88%. In comparison, the annualized realized volatility of "magnificent seven" stocks such as Tesla , Meta, and Nvidia was over 50%.
Bitcoin's 1-year volatility vs. magnificent seven stocks. Source: Bloomberg
Moreover, Bitcoin has shown relatively lower volatility compared to 33 of the roughly 500 companies in the SP 500 index, noted Fidelity Investment in its latest report .
Notably:
"Bitcoin was actually less volatile than 92 of the SP 500 stocks in October of 2023 when using the 90-day realized historical volatility figures. Some of these names are also large-cap and mega-cap stocks."
Bitcoin mirroring gold volatility patterns
Bitcoin's annualized volatility in its nascent years was over 200%, a trend typical among newer asset classes with higher capital inflows. This is because these inflows represented a smaller proportion of the total capital base.
Consequently, new investments are less likely to significantly influence market prices or the decisions of marginal buyers and sellers, as illustrated in Bitcoin's long-term volatility chart below, showing a gradual stabilization of volatility over time with a downward-sloping regression line.
Bitcoin's recent volatility patterns closely resemble gold's in its early trading years. Like gold, Bitcoin has undergone a period of price discovery, marked initially by high volatility, which gradually subsides as the market matures.
Gold prices surged with inflation after its decoupling from the U.S. dollar in 1971 and the legalization of its private ownership in 1974. As a result, the precious metal's volatility reached over 80 during the early 1970s—almost twice that of Bitcoin in April 2024.
However, as gold became an established asset class with a more stable price range, its volatility decreased. This similarity suggests that, like gold, Bitcoin is transitioning toward a more stabilized asset class as it becomes better integrated into the broader financial landscape.
One major evidence emerges by comparing Bitcoin’s annualized volatility of around 44% at its current price highs above $60,000 with around 80% three years ago when the price was around the same level.
"What this may be pointing to is a growing belief that Bitcoin is maturing, further accelerated by the landmark approvals of several spot Bitcoin exchange-traded products in the U.S.," argues Fidelity researcher Zack Wainwright, adding:
"Bitcoin was nearly half as volatile in 2024 at $60,000 when compared with 2021. When putting this all together, a thesis pointing toward a growing acceptance of Bitcoin due to potential maturation begins to emerge."
Major BTC price jump ahead?
Interestingly, the period of lower annualized Bitcoin realized volatility has preceded major price increases. In other words, accumulation sentiment among existing and new Bitcoin investors tends to rise when the price stabilizes.
Bitcoin annualized realized volatility vs. price. Source: Glassnode
Bitcoin's 1-year volatility was around 43% in December 2023. Since then, its price has risen by circa 75%, helped further by the demand for spot Bitcoin ETFs in the United States. As of May 11, these ETFs had attracted $11.68 billion cumulatively.
Spot
Bitcoin ETF cumulative inflows. Source: Farside Investors
Robert Mitchnick, head of digital assets for BlackRock, the world's largest asset-management company, notes that the coming months will likely see significant players like sovereign wealth funds, pension funds, and endowments engaging with spot Bitcoin ETFs.
Institutional investors typically have stringent risk management protocols. Lower volatility in an asset class translates to more predictable and stable returns, which align better with their investment strategies.
“It’s very important to remember that this takes time; these companies are just starting to do their due diligence,” independent market analyst Scott Melker argues , adding:
"The massive institutional flood of money that will drive bitcoin to all-time highs."
Melker expects the BTC price to rise toward $100,000-150,000 range due the anticipated ETF inflows.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
US Diesel Faces a “Perfect Storm” of Rate Hikes and Midterm Elections! EIA Warning: Demand Peak Not Yet Reached, Prices Hit New High, Inventory Drops to Lowest Level in 23 Years
US diesel inventories are expected to fall to their lowest level since 2003 before peak demand arrives.
Ford Publicly Hits Back at US Secretary of Transportation, US Auto Industry "Fighting to Preserve Electric Vehicles"
The U.S. Secretary of Transportation is pressuring to cut off cooperation with Chinese companies such as CATL. Ford criticized Secretary Buttigieg for "overstepping" and being "factually incorrect," citing positive statements from the White House and the Department of Commerce as evidence that Buttigieg does not represent the official government position. The core conflict lies in the fact that U.S. carmakers' transition to electrification is highly dependent on Chinese battery technology. Severing cooperation would force them back into the shrinking fuel vehicle market, putting the policy goals of manufacturing reshoring and electrification upgrades in a dilemma.
"The Most Unsexy Investment Strategy" is Timely! As Bonds Collapse and Stocks Soar, Investors Face a Great Opportunity for Rebalancing
Financial advisors indicate that, amid global bond sell-offs, stock markets hovering near historic highs, and investors facing geopolitical uncertainties, now may be an especially suitable time to consider portfolio rebalancing.
They boosted the Yen but failed to hold U.S. Treasury bonds! Is Basent a "weak teammate" for U.S. stocks?
This week, Besant made high-profile calls to suppress yen short positions and raised the US Treasury repo limit to $6 billion. As a result, the yen strengthened, but US Treasuries declined—10-year yields hit their highest level since October 2023, and 30-year yields approached a twenty-year peak. Analysts noted that the combination of a stronger yen and rising US Treasury yields is simultaneously impacting carry trades and stock valuations, posing a dual threat to the US stock market bull run. This is described as "the greatest risk facing the bull market."
Crypto prices
More
