Bitcoin’s Low Volatility: A Trendy New Phase or a Temporary Calm?

Bitcoin’s Journey Through 2019

As we folded the last pages of 2019, Bitcoin (BTC) surprised many with astonishing low volatility levels. According to the insightful report from SFOX released on January 8th, Bitcoin seemed to be taking a chill pill and avoiding the wild swings that investors had grown accustomed to. It was like watching a roller coaster that suddenly turned into a leisurely merry-go-round.

Lower Correlation with Altcoins

For those not familiar with finance lingo, correlation effectively gauges how much two assets move in tandem. Bitcoin flaunted a remarkably low correlation with altcoins, diving from averages of 0.7 to a much more subdued 0.4. It’s like Bitcoin decided it no longer wanted to be the popular kid at school trying to befriend everyone. Instead, it focused on maintaining its individualism. This might just suggest that BTC is carving out its unique niche in the world of cryptos, away from the raucous antics of altcoins.

The Volatility Story

Throughout 2019, Bitcoin showcased volatility as low as 32.05 percent—almost a nap time compared to the chaotic swings of the previous year. Statistically, this placed Bitcoin in the bottom 10 percent of its usual volatility range. It’s reassuring for investors to see that BTC isn’t always jumping around like a caffeinated squirrel.

Comparing Bitcoin to Traditional Assets

When we pull out the financial score sheets, BTC makes an impressive showing with a staggering year-over-year return of 93.8 percent, dwarfed only by the S&P 500’s mundane 29 percent and gold’s shiny 52.8 percent. However, before you start proclaiming Bitcoin as the prima donna of the investing world, we should consider its outrageous risk compared to the stability of traditional assets.

The Risk-Reward Ratio

Risk can be a double-edged sword. The Sharpe ratio, known in finance circles as the “divine indicator” of risk-reward, weighed in at 1.74 for Bitcoin, compared to 2.54 for the S&P 500. This means that while Bitcoin might be bringing home the bacon in terms of returns, traditional stock markets appear to be the wiser investment choice based on this risk assessment. Think of it this way: if you were offered a thrilling yet dangerous bungee jump versus a safe, relaxing picnic, it’s tempting to go thrill-seeking, but you might just enjoy that picnic a whole lot more—with way fewer heart palpitations.

Staying Ahead: Future Predictions

So what’s on the horizon for 2020? SFOX hinted at the upcoming Bitcoin halving and freshly minted option contracts as potential catalysts for change. But watch out for the lurking shadows of tech company pressures, such as the recent YouTube content ban. As they say in crypto-land, while the future may seem bright, don’t forget your shades—and maybe an umbrella too!