Bitcoin volatility: a scarecrow to deter investors

By: Bharggavi Ssayee

March 24, 2021 3:36 PM

Will institutional investments reduce Bitcoin's volatility and increase its attractiveness? This is not the sentiment of an Oppenheimer executive or Fed Chairman Jerome Powell.

Bitcoin's volatility remains a scarecrow for many investors. But for the research director of Goldman Sachs, the remedy could come from the institutional ones. The more they invest in Bitcoin, the more volatility of the asset will attenuate.

This hypothesis is not unanimous, however. According to Ari Wald, head of technical analysis at Oppenheimer, the high volatility of the cryptocurrency isn't going away anytime soon. And this one to prevent.

Central Banks Tackle Bitcoin Volatility
“You have to be able to handle this volatility. It's here to stay, ”he said on CNBC. “With the rising reward comes a lot of volatility day to day and even week to week,” he adds.

And the fluctuations of BTC in February provide a perfect illustration. However, this volatility does not mean the end of the growth of the crypto asset. Bitcoin last month "peaked at around $ 58,000 and the next day was down to $ 44,000. It has been really volatile and has consolidated since then, ”comments Ari Wald.

How to buy Bitcoin easily?
For the boss of the US Federal Reserve, Jerome Powell, there is no doubt that Bitcoin is "highly volatile". Because of its unpredictability, he therefore believes that cryptocurrency cannot be "really useful as a store of value."

The director of the Fed is also contesting the possibility of Bitcoin finding its place as a means of payment. For the latter, cryptocurrencies are primarily "speculation". And if they are an alternative, it is to gold and not to fiat currency.

These different characteristics make them risky assets. And Powell cautioned investors. “I think with crypto assets, the public has to understand the risks,” he says.

High volatility in BTC, but which is decreasing
The Fed leader, however, is not opposed to digital currencies, at least stablecoins. But not under any conditions though. “Stablecoins may have a role to play with proper regulation, but that role will not be to form the basis of a new global monetary system. "

As for other currencies, like Bitcoin, does their volatility condemn them? For JPMorgan, the value of BTC can climb to as high as $ 146,000, but only with less volatility to appeal to more institutional investors.

However, it has largely abated over the years. Bitcoin's average annual change is 69%, compared to 27% for silver, 13% for gold and around 20% for stocks, according to bank strategy director Morgan Stanley.

However, this indicator is far from being fixed, unlike precious metals. “Since the launch of Bitcoin, its volatility has decreased from an annual average of over 400%,” said Ruchir Sharma.