When size matters: how Bitcoin's market cap is affecting volatility
The case for the end of diminishing returns
When Bitcoin was small, people worried it would not survive. Now that Bitcoin is worth hundreds of billions of dollars people are worried about diminishing returns.
The journey between these two sentiment has been extremely quick. So what is the current situation really and how did we get there?
Let’s look at this from the perspective of volatility.
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When size matters: how Bitcoin's market cap is affecting volatility
The takeaway
Bitcoin's volatility plummeted on its way to a $100bn market cap. The long tail of extreme events has completely disappeared. And even the median volatility has started to move lower.
I guess that’s what you expect from a maturing asset.
However looking at it from a different angle you can make the case that Bitcoin’s volatility is unlikely to move much lower on the road to a $10 trillion market cap.
Looking at the evolution of Bitcoin’s volatility by market capitalization the trend shows that the days of quickly diminishing volatility are over. And it is more likely than not that BTC will stay continue behaving like a large cap, high growth tech stocks for a while. Think Tesla. Think NVIDIA.
But this is a good news. Volatility rhymes with opportunity. And if the volatilty stays where it is BTC is also less likely to experience further diminishing returns.
Let’s unpack that.
Why care about volatility
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