Bitcoin’s annual volatility has dropped below that of top tech stocks like Tesla, Meta, and Nvidia, indicating its progress towards becoming a more stable asset class. As of May 11, Bitcoin’s one-year realized volatility was approximately 44.88%, while the annualized realized volatility of stocks like Tesla, Meta, and Nvidia was over 50%. Bitcoin has also shown lower volatility compared to 33 of the companies in the S&P 500 index, according to a report from Fidelity Investment.
In its early years, Bitcoin experienced annualized volatility over 200%, which is typical for newer asset classes with significant capital inflows. However, as more capital flowed into Bitcoin, its volatility gradually decreased. This pattern mirrors the volatility patterns of gold in its early trading years. Gold experienced high volatility initially, but as it became an established asset class, its volatility decreased. This similarity suggests that Bitcoin is transitioning into a more stable asset class as it becomes integrated into the broader financial landscape.
Lower volatility in Bitcoin has often preceded major price increases, as it signals increased accumulation sentiment among investors. In December 2023, Bitcoin’s one-year volatility was around 43%, and since then, its price has risen by approximately 75%. The demand for spot Bitcoin ETFs in the United States has also contributed to the price increase, with these ETFs attracting a cumulative total of $11.68 billion as of May 11.
Robert Mitchnick, head of digital assets for BlackRock, expects significant players like sovereign wealth funds, pension funds, and endowments to engage with spot Bitcoin ETFs in the coming months. Institutional investors typically prefer lower volatility in an asset class as it aligns better with their risk management protocols and investment strategies. Independent market analyst Scott Melker predicts that the BTC price could rise to the $100,000-150,000 range due to anticipated ETF inflows.
It’s important to note that this article does not provide investment advice or recommendations, and readers should conduct their own research before making any investment decisions.