Some investors firmly believe in it Bitcoin (CRYPTO: BTC) and other cryptocurrencies, while others are far more skeptical. But everyone can agree on one thing – Bitcoin is a volatile asset.
In this Fool Live video clip recorded on March 18thMatt Frankel, CFP at Fool.com, asks Onramp Invest CEO and cryptocurrency expert Tyrone Ross about Bitcoin’s volatility and what investors should be aware of.
Matt Frankel: One of the things that they worry about the most, and it’s something that Bitcoin bulls are really excited about, it’s the volatility. Bitcoin is currently worth almost ten times as much as it was a year ago.
Tyrone Ross: Yes.
Frankel: In fairness, this is not stable as a payment mechanism.
Frankel: What do you think of investors who are concerned about Bitcoin’s volatility despite high risk tolerance?
Horse: I want to go back to what you said. The Bitcoin blockchain is a beautiful payment mechanism. The price is not. So you have to separate these two. I agree with you. It shouldn’t be a payment mechanism.
Now something called Lightning is being built, but you shouldn’t be buying things with your Bitcoin anyway, for exactly what I said. Every time you buy a coffee it is a chargeable event, and that includes other things too. What I think is important here about volatility is, yes, those of us who are crypto hippies look at volatility and say, “Oh, it’s great” because we can take it and know better. The average person says, “It’s down 80%.” Many people cannot stand a 10%, 5%, 1% decline. That thing falls 80%? A lot of people don’t want to take this roller coaster ride.
But volatility, in learning about bitcoin, is a feature, not a bug, and it’s one of those things that when you look at it, it’s also evidence of how early we are. It is smoothed out. In the past month, the 30-day volatility was higher than in the past seven years. In 2013, the 30-day volatility increased by more than 160 percent. My company has been researching this. It was picked up. So the volatility has increased. The correlation to risk-weighted assets. It came with it a year ago when things went crazy because the first thing you do is sell risky assets so we’re still there. But every day it gets stronger and grows and it persists and you get more institutional acceptance and there is an opportunity for big investors to move in size with the best execution and pricing. These things are important and we are getting there.
But for now, yes, the volatility for those of us who can take it and know you are saying “yes it’s on sale” but not everyone can do that. And that will change.
Frankel: So, from your point of view, is it more important that Bitcoin move from 10% to 20% than from $ 20,000 to $ 50,000?
Horse: Exactly. That’s the key, and there’s that volatility and acceptance too. Because think about it. Go back to 2017. It’s all retail, and now all the institutions are saying, “Look at those idiots.” Now the institutions are coming in, and now all the retail stores they’ve been and stayed in say, “Look at those idiots.” So the volatility of who comes in; the volatility of the price; the volatility of pricing.
I did a webinar with Digital Assets Research and FTSE Russell, and anytime you can check the price of Bitcoin on some exchanges, it could go down 2%. That’s crazy. There is volatility in many different things in what is new, and the best example is this; I am not a parent but I have three nephews. Have you ever watched a child learn to walk? That is very volatile. “Oh, they’re going to hit their heads. Oh, they fell again.” And do you know what they are doing? You get up and keep trying and fall.
But it’s a very volatile thing. It’s new. Anything new or 12 year olds – Bitcoin is 12 – 12 year olds are volatile. I joke this by comparing a technology to a human, but anything new will be volatile. It’s just like that, and then it has to find its way, and I think that’s what happens in this room.
Frankel: It is fair to say that as adoption continues, eventually it will stabilize. That could be in 20 years, but it should find some kind of balance at some point.
Horse: Yes it will. I think people like me, longstanding call options for a store of value, I think it will get there. I don’t think it’s there now, but you bet it will be in the future.
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