With all the mug punters of the world seemingly going all a flutter in their neither regions over Bitcoin and all the talk about how volatile it is, I thought I would take a quick and dirty look at how volatile it is in comparison with other instruments and whether the current level of volatility was historically high for Bitcoin. Below is a table comparing the 30 day historical volatility of some commonly traded instruments as well as the 250 day average HV of the 30 day HV. This serves as a dirty (read lazy) proxy for the true mean HV.
As you can see Bitcoin displays a remarkable level of volatility when compared to other instruments. However, currently it is below its own long term average HV. Trouble starts when people begin to ascribe a characteristic to these sorts of measures. The only thing we can rationally say based upon the evidence at hand is that Bitcoin does display a level of volatility well beyond that shown by more traditional instruments but it is below its own long term HV. This situation is neither good no back and is in no way reflective of the utility of Bitcoin as a trading instrument within a portfolio. I have been over the fact that trend and volatility are in no way related so I wont labour the point here. Suffice to say all that matters is how well an instrument trades – volatility in many respects is an irrelevancy and a needless distraction.
If you find the concept of Bitcoin confusing, you are not alone. The virtual currency has been a constant source of controversy, but it is still not well understood.
More here – The New York Times