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Tuesday, May 28, 2019

Is There a True Volatility Index for #Bitcoin?


Is There a True Volatility Index for #Bitcoin?


Bitcoin just rose over $8,000 in the last 24 hours. If you compare it to exactly 3 months ago, On February 27th, the roof was at $3,832.26. Considered a low price, and stuck on the wobbly statistic that the month of February is always a good month for cryptocurrency, in this case BTC, growth was expected in all fronts.

Already Bitcoin is going down after hitting a price of $8,840.00 per unit during the weekend. When it comes to crypto, there’s always a boom that can plunge the price or skyrocket it. The secret for obtaining the best ROI possible is strategy, gut, and of course experience.


I foresee BTC going down in price again, not as low as $3,000 like in February and not as high as in this very moment. Predicting that it will go down to a price between $6,500-$7,000 range the question will remains; is there a valid technique to measure and control bitcoin volatility?

Bitcoin is measured in traditional markets by the CBOE Volatility Index (VIX). There is no standard index since cryptocurrency as an asset class is still in its newborn stages. We have already known that Bitcoin is capable of volatility in the form of 10X changes in price versus the U.S. dollar, in a timeframe.

There are several causes for cryptocurrency to go bearish or bullyish:

Whenever geopolitical events and statements by governments that bitcoin is likely to be regulated. Conflictive or questionable events bring in a bad reputation, though nowadays positive investors see this as market maturing.

The perceptions of the intrinsic value of the cryptocurrency as a store value and method of value transfer. While bitcoin is limited to a fixed amount production of 21 million BTC, governments continuously adjust their currency for its economies and societies health.

The uncertainty of Bitcoin’s future value: Bitcoin volatility is also driven in large part by varying perceptions of the intrinsic value of the cryptocurrency as a store of value and method of value transfer.

Bitcoin volatility is also driven by the amount of crypto. Holders of large proportions of the total outstanding float of the currency. The currency has yet to hit the mass market adoption rates that would be necessary to provide option value to large holders of the currency.

Bitcoin is affected by the possibility of a security breach. It scares potential investors and the very owners of crypto. The cryptocurrency community often diminishes by assuming the responsibilities of developing new and better coded solutions. This gives the market certain confidence.

Countries with high inflation rates may choose to use crypto, or BTC as their coin’s volatility is higher than Bitcoin’s. This would make the adoption of Bitcoin a lower risk investment and a higher ROI instrument.

The IRS recently announced that the currency is actually an asset for tax purposes had mixed effects on volatility. Any acceptance towards cryptocurrency is a favorable, yet this statement by the IRS makes bitcoin an asset that has to be declared. The negative effect could be a slower adoption of cryptocurrency by potential investors.

Bitcoin represents an opportunity that has never been proposed before, new opportunities and implementation arise constantly as the market develops further. BTC has still to convert all the skeptics for the rate of adoption to rise.

Acknowledgements such as the one made recently by the IRS has clarified the situation for investors, the apparent frictionless value transfer suggests that new use cases in foreign investment will happen.

This past weekend’s Bitcoin rise in value can most certainly be a direct consequence due to  “word of mouth” or the investor’s perception of the ability gateways to safeguard individual holdings and provide for a reliable store of value as adoption increases. 

Bullyish or bearish? Volatile or stable?
Just as bitcoin rose sky high these last days, and as  it will definitely fall in some way sooner or later, only to rise again market adoption will ultimately be bitcoins one true real Volatility Index.

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