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When in doubt, zoom out. On larger timescales, this isn't really that much of an issue. Volatility is also trending downwards. The bigger it gets, the more st
by mj4m1n 6y ago
When in doubt, zoom out.
On larger timescales, this isn't really that much of an issue.
Volatility is also trending downwards. The bigger it gets, the more stable it becomes.
- MereInterest 6y agoYou're appealing to future data that are not available yet. Bitcoin has never been stable in its existence. You are positing without evidence that it will become stable in the future.
- _alex_ 6y agoMany assets start volatile and become more stable over time. As more money comes into bitcoin and the market cap goes up, it's reasonable to assume that volatility will go down.
- mcosta 6y agoMany assets start volatile and end up in a stable 0.
- mj4m1n 6y agohttps://charts.woobull.com/bitcoin-volatility/ https://charts.woobull.com/bitcoin-volatility/
- beefield 6y ago> The bigger it gets, the more stable it becomes. To be clear, there is no mechanism, logic or reason (at least revealed to me) why this would be true. Vice versa, increased amount of trading typically increases volatility.
- jakupovic 6y agoIf more powerful actors are owners they will not need to sell upon volatility hence providing more stability.
- mj4m1n 6y agoYes, Microstrategy or Tesla have no interest in daytrading.
- beefield 6y agoI am not sure I follow the logic. Bitcoin becomes "bigger" when there are more big actors not using it but just hoarding it? And thus less volatile - until one of these big actors decide to dump their holdings to the thin market used to trade only scraps left from these big actors... Sorry, not convincing.
- mj4m1n 6y agoThe idea is that bitcoin is something you prefer over fiat currency in your bank account. The same idea that gold bugs have. If that's the case, then bitcoin owners will only dump their holdings if a) they fear that the bitcoin network is about to collapse for some reason or b) they need to put the value stored in those bitcoins to use.
- krona 6y agoincreased amount of trading typically increases volatility. Define amount. If you mean number of trades, then the effect is decreased standard deviation if the average trade is smaller as a percentage of total market capitalisation. That seems completely logical. See: pretty much every study in to HFT.
- beefield 6y agoTrading volume. It was taught to me so long time ago and I have thought it so obviously true that I haven't questioned it ever. If you want sources, here is one example (TBH, I only read abstract) I quickly googled. To me, number of trades does not sound a reasonable measure for analyzing markets in macro level, even if for HFT it may be interesting, I know nothing about that. https://core.ac.uk/download/pdf/4837179.pdf https://core.ac.uk/download/pdf/4837179.pdf
- hntrader 6y agoIt's true everywhere already. Compare the SPY to a large cap stock to a small cap stock, and you'll see tail events decrease monotonically along market cap. Compare BTC to a shitcoin. Compare the USD to a smaller currency. It's known to be a true thing and rather universal. Compare BTC now to many years ago. The mechanism is that you get flows hitting both sides simultaneously (56 buyers vs 44 sellers) that tend to cancel out, instead of a single player (3 buyers vs 1 seller or vice versa) dominating the flow. BTC volatility will go down as adoption goes up.
- wpietri 6y agoI think you're confusing cause and effect. People value stability, so more money goes into those things. E.g., SPY is an synthetic asset engineered to be lower vol. I don't think it's at all clear that Bitcoin adoption will go up. It's never been useful as a currency for most people, and Tesla aside, merchant adoption has been in retreat for years. KYC/AML laws are reducing its utility for financial crime. Its only real advantage is in speculation and market manipulation. But both of those depend on volatility.
- hntrader 6y agoI'm not confusing cause and effect. Large cap stocks weren't engineered for stability, but they're lower tail-risk than mid cap stocks, which are lower tail-risk than small cap stocks, and so on. The same phenomenon has been broadly true across all markets over all of human history, and the underlying mechanism (heterogeneous flows) is well understood and rather intuitive. Whether or not BTC adoption increases is not relevant to what I was saying. My only claim is that volatility will decrease if adoption increases, counter to the misplaced scepticism of the post I was replying to If BTC adoption decreases instead, then volatility should increase, ceteris paribus.
- koheripbal 6y agoBusinesses don't operate on a "zoomed out" timeline. Volatility in the short term causes cashflow driven liquidity bankruptcy.