We have forgotten that Bitcoin does not yet have a globally recognized story.

Everyone has a different understanding of volatility.

This is like different people seeing the same headlines, they all have their own understanding, which has a lot to do with his personal experience.

Volatility refers to dramatic and unpredictable changes that often have a negative meaning. In financial markets, most people instinctively avoid assets that fluctuate wildly.

On the other hand, investors like it when they can make money, and traders see the risk premium caused by volatility.

Bitcoin is a highly volatile asset. The chart below shows the change in bitcoin volatility over time over a one-year period:

In the case of standard deviations, we will find that the volatility of Bitcoin is declining, which seems to indicate that the Bitcoin market is maturing.

But the extreme data is removed, and the influence of outlier data (a more common means of statistics) is used. The volatility of Bitcoin has not changed much in one year, and it is still the high fluctuation. Sexual assets.

Why is bitcoin volatility high?


Bitcoin is currently a rare "Real Asset", and its value is not related to other assets, only its own attributes.

Like gold as “Real Asset”, Bitcoin does not have the concept of cash flow and income, which makes it difficult to value it. Analysts can't value Bitcoin through the so-called fair value of cash flow.

With the view that many people think that Bitcoin is a pyramid scheme, the value of Bitcoin depends on consensus.

At present, the value of Bitcoin is equal to the value of the market. In the absence of traditional fundamentals, most investors are actually speculating about what other investors think, so mainstream capital, main fund, and Zhuang. . . . And so on.

The same is true for gold, which has no cash flow and its market value is mainly driven by consensus.

Volatility comparison of gold and bitcoin

But why is gold volatility lower? Because of the certainty of gold.

In the financial market, the fundamentals do not determine the price, and the market's description of the fundamentals determines the price.

At present, Bitcoin is uncertain. People who invest in Bitcoin are not sure about their fundamentals. If you ask ten people, you may get 20 different answers. World currency, digital gold, faith, blockchain MLM. and many more.

While gold has existed for thousands of years, the market is relatively more stable about its mood, because the story of gold has a good global consensus.

For now, the story of Bitcoin is not stable, and its unstable story means that its volatility is unlikely to weaken in the short term.

So before Bitcoin has a story that everyone believes, market sentiment will be very susceptible to changes in events and prices will change.

But no matter which direction its story develops, the Bitcoin market will continue to zoom in that direction.

This reminds me of our last week's article, BTC and ETH: Positioning Victory.

In the circle, most people take it for granted that the positioning of Bitcoin and Ethereum is very clear, but feedback to the trading market, its high volatility shows that even the most liquid assets in the circle lack a common consensus. The story, or rather, at a certain time, it may have a story that everyone recognizes, but the story is not strong.

In the recent year, it seems that there is no new story. Everyone relies on old stories to recharge their faith. I don’t know whether it is good or bad.


Reference materials:


Compile: Wind Answer

Source: Orange Book