Bitcoin Price Volatility Consistently Declines Over The Years

Bitcoin, the controversial digital currency, was invented by the mysterious Satoshi Nakamoto who published the invention on 31 October 2008 in a research paper called "Bitcoin: A Peer-to-Peer Electronic Cash System", which was implemented as open source code and released in January 2009.

From January 2009 to January 2010, bitcoin users were mainly cryptography fans who were sending bitcoins for low or no value and there were no exchanges or market. Between February 2011 and April 2011, bitcoin took parity with the US dollar (according to Wikipedia).

Bitcoin is often criticized for being too volatile. If one looks at the highs and lows of BTC/USD over the years, he will simply conclude that bitcoin price is highly volatile – it shot up to $1163 in November 2013 and within 20 days it fell to 382.12 levels. However, a closer look at price charts suggests that BTC/USD is showing price actions but is less volatile.

In fact, the volatility of bitcoin price against major currencies such as US Dollar has declined significantly since 2010, according to data provided by the Bitcoin Volatility Index. The rate of volatility has been decreasing at a consistent pace, falling at an average rate of 25% per year, NewsBTC reported.

The standard deviation of daily returns (volatility rate) at the beginning of 2011 was recorded around 8.5% and towards the year end it fell to 5.36%. Towards the end of 2012, the volatility rate of bitcoin recorded a significantly lower 1.57% - a 71% decline in volatility since the past year.

According to Pantera Capital, a digital currencies focused investment firm, one-year volatility hit all-time low in 2015, reaching around 52% in July and falling to below 50% in November and December. Since last January, Bitcoin has consistently maintained a low volatility rate, outperforming precious metals, assets, and currencies.

With bitcoin price relatively stable in 2015, more and more traders and investors in the public markets are purchasing Bitcoin ETFs – like Bitcoin Investment Trust – as a major part of their investment portfolio, NewsBTC reported.