Why should you be afraid to own BTC

During 2021, the price BTC very volatile, rising and falling at six times the rate of gold per day.

This was revealed by an analysis by Scott DeCarlo published a few days ago by Shawn Tully in Fortune, which revealed that gold showed average and median daily variations of only 1.4% and 1.3% during the year, compared with 9.1% for BTC and 7.6%.

Tully calls BTC “the most unlikely, most dangerous and completely unpredictable investment category on the planet.”

However, although he says that investors have traditionally avoided excessive volatility, he points out that even after its value fell by 50% from its highs three months ago, BTC still rewards its holders sufficiently in the long run. This means that because BTC tends to be the best in the long run, holders must accept large and very fast fluctuations and higher risk tolerance.

Why not be afraid to own BTC

Scott DeCarl’s analysis was performed on the BTC price trend from early 2021 to July 8, using the percentage difference between daily lows and highs as a benchmark. De Carlo then calculated the same parameter for S&P 500 and gold.

Calculations showed that during the 146 trading days considered, on April 1, the smallest difference between the daily maximum and the daily minimum of BTC was 2.5%, and in only four days it was less than 3.1%. In contrast, the price of BTC within 131 days, ie. 89% of the time, fluctuated by at least 5% during the day, with the value of 10% being exceeded 39 times, or more than every fourth day. 17 days also exceeded 15%.

The overall mean deviation was 9.1%, while the median was 7.6%. From this it can be deduced that a price deviation between 8% and 9% can be expected more or less every day.

However, in the case of the S&P 500, the largest single daily change on March 5 was 3.3% and only six times exceeded 2%. In two thirds it was below 1%. The arithmetic mean variance for S&P was 1% and the median 0.9%, so the average daily variance of BTC is about 8 times more volatile than for large companies.

Gold has been found to be more volatile than the S&P 500, but much less so than BTC.

The largest daily deviation was 4.9% on 8 January, while the second largest deviation was 3.3%. However, on only 3 occasions was it higher than 3%. The average daily deviation of the gold price was 1.4% overall, while the median was 1.3%, which is six times less than for BTC.

In light of these numbers, it is clear that investors in BTC need to be much more patient than those who invest in shares of large companies or gold. On the other hand, it should be added that not all investors are fleeing from volatility, and there are indeed those who seek it voluntarily.