One of the most often heard concerns is how Bitcoin is a volatile asset. Its price has certainly seen plenty of ups and downs along the way. Even so, one has to keep in mind the volatility works both ways, which is part of Bitcoin’s appeal.
The Reason why Bitcoin is Volatile
Most people look at a Bitcoin price chart and automatically deem it to be volatile. While there is something to be said for that sentiment, Bitcoin isn’t the only financial asset with value fluctuations. Every single financial instrument in the world goes through ups and downs, often multiple times per day. This applies to speculative assets, fiat currencies, and so forth.
In the case of Bitcoin, the price changes are a lot more outspoken. Price differences of $100 or more are not uncommon for this asset by any means. In fact, there have been multiple cases where the Bitcoin price can swing by $1,000 in either direction. Those days are less common now compared to a few years ago, though.
Interestingly enough, there is also a BItcoin Volatility Index. It tracks the fluctuations of the world’s leading cryptocurrency over time. While there is still some fluctuation to speak of in 2020, it has become seemingly less outspoken.More specifically, the negative price pressure has – except for March of 2020 – been mainly absent this year.
Judging by the chart above, the overall volatility is more than “acceptable”. Granted, a ratio of 1101% over the past 60 days may strike a lot of people as risky. There is certainly some truth to that point of view. However, these price swings work both ways: there are strong losses, but often even stronger price gains.
One of the reasons we started Vaultoro.com is so that people could trade into another bearer based asset like gold without having to trust banks. Gold is fully insured and audited so the risk profile is way less than going back into fiat in a bank.
Volatility Swings Both Ways
Contrary to what most people think, volatility is not a unidirectional trend. It indicates a big price shift, either for the better or worse. In recent years, Bitcoin’s downward price trends have made a lot of headlines. Very little has been written about the world’s leading cryptocurrency heading in the other direction.
As can be seen in the aforementioned chart, the overall volatility ensues because of Bitcoin’s recent uptrend. The value of BTC has increased by roughly $5,000 in the past 60 days. A strong sign of volatility, but one that most traders and speculators welcome with open arms. After all, when the price goes up, everyone is happy, and volatility be damned.
Investing in any financial vehicle will always carry certain risks. If you don’t like to see prices go up and down too much, it is best to avoid investing altogether. Financial stability is very difficult, if not nigh impossible, to come by. Especially that the COVID-19 situation will not improve in the near future either.
Bitcoin has wilder price changes than most other assets. It is also the best yearly performer of the best decade, which has to count for something. You cannot have the profits without seeing a few dips along the way. That applies as much to Bitcoin as it does to any other investment vehicle.