According to the latest data, as of May 11, the actual volatility of Bitcoin over the past year was only 44.88%. In comparison, the annualized volatility of top tech stocks, including Tesla, Meta, and Nvidia, all exceeded 50%. This suggests that the volatility of Bitcoin has decreased significantly, and the global market views it as a more mature and stable investment asset.
From Fidelity’s report, the volatility of Bitcoin is relatively low among the approximately 500 companies in the S&P 500 index. Analysts point out that in the early stages of the market, Bitcoin exhibited an annualized volatility of over 200%, which is a characteristic of a new asset class. Fidelity Digital Assets research analyst Zack Wainwright states that this high volatility usually occurs when new capital enters the market, especially when this capital is small relative to the existing market size.
However, these new inflows of funds are enough to cause price fluctuations, particularly in emerging markets where the market size is still small and the number of participants is limited. In these markets, even small buy and sell orders can lead to significant price volatility, as the market is not yet mature and does not have enough trading volume to absorb the impact of these new funds.
Over time and as the market matures, the volatility of Bitcoin has decreased. This process can be seen from the long-term volatility trend, where the regression line is clearly sloping downward, indicating that as market acceptance increases and trading activity grows, the price fluctuations of Bitcoin become more stable.
Zack Wainwright also points out that the volatility pattern of Bitcoin is similar to that of gold in the early market. Gold also experienced a similar price discovery and volatility adjustment phase after the US dollar was decoupled from the gold standard in 1971 and the legalization of private ownership in 1974, during which it also experienced high initial volatility before stabilizing as the market matured and received more policy support.
Low volatility may be a precursor to price increases. Wainwright suggests that periods of low volatility, when Bitcoin’s price movements are relatively small and the market is relatively calm, may lay the foundation for future price increases. He cites four past market examples, one of which occurred in early 2024, where prices experienced sharp increases after periods of low volatility.
These examples indicate that when Bitcoin’s volatility reaches an abnormally low level, it may be a signal that the market is about to turn. During these periods, as price fluctuations are not significant, investors may increase their holdings or new investors may enter the market, increasing buying pressure. Once the market sentiment changes, this can lead to a rapid price increase.