A study conducted by Max Gulker from the American Institute for Economic Research (AIER) has concluded that Bitcoin has less market volatility than other major cryptocurrencies. Every single year since 2013, the Bitcoin market has experienced lower volatility than Ripple, Litecoin, Ethereum, and Bitcoin Cash according to data from CoinMarketCap.com.
The study calculates the absolute value of daily percentage changes and averages them across the year for each cryptocurrency. So far in 2018, Bitcoin’s volatility is less than 4%, Ethereum and Litecoin are a little over 4%, with Bitcoin Cash and Ripple being the most volatile near 6%. Bitcoin’s volatility was just over 4% in 2013 and declined to under 2% in 2016, and since 2016 yearly volatility has been rising. Essentially, this means when Bitcoin hits peak prices it is more volatile, and when the market bottoms out it is less volatile.
The study finds that major cryptocurrencies are most volatile right after they launch, and converge towards Bitcoin’s volatility in the long term. In 2018, the volatility of the five cryptocurrencies in the study was in a more narrow range than ever before.
The lower the volatility of cryptocurrency’s USD price, the more functional it is as a currency and the less stress there is for investors. If there is too much volatility for a particular cryptocurrency then it becomes undesirable for storing money and for use as a currency. People don’t want to lose significant amounts of money while sleeping, and merchants don’t want to take significant losses in accepting cryptocurrency payments.
Another metric calculated in the study was days per year with price changes of 10% or more. Bitcoin is once again the least volatile according to this metric at less than 20 days per year, Litecoin is a little over 30 days, Ripple is at 40 days, Ethereum is just under 50 days, and Bitcoin Cash has over 80 days per year with price changes greater than 10%. This once again shows that the older a major cryptocurrency is, the more it converges towards Bitcoin’s volatility.
Although Bitcoin is the least volatile cryptocurrency, it’s price is nowhere near as stable as major fiat currencies and gold relative to the USD according to another study by AIER. In 2017, Bitcoin’s volatility was 4.1%, while the GBP, EUR, JPY, and gold had a volatility of 0.5% or less. More striking, the GBP, EUR, JPY, and gold haven’t seen any days with a 10% or greater fluctuation relative to USD. Therefore, for use as an everyday currency Bitcoin is not as ideal as major fiat currencies and gold.
Cryptocurrencies are the most volatile widely traded assets in history according to AIER’s research. Of course, not all volatility is necessarily to the downside. Bitcoin has also increased more in value percentage wise than any other widely traded asset in history. Since 2010 when BTC 10,000 were used to buy two large pizzas, the price for a Bitcoin has increased from USD 0.003 to USD 6,700, which is 223.3 million per cent.
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