Binance CEO Says Volatility"Not unique to cryptocurrencies": Data Shows It's Bitcoin's Aviation Fuel
On May 3, Binance CEO Changpeng Zhao proposed in an interview with Bloomberg TV that Bitcoin (BTC)"Potentially less volatile stock prices than Apple (AAPL) and Tesla (TSLA)". According to Changpeng Zhao, the volatility of cryptocurrencies is in line with that of the stock market, and he also said:"Volatility is everywhere"，"This is not unique to cryptocurrencies"。
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60-day historical volatility, BTC vs stocks. Source: Cointelegraph
The first obvious reading from the chart above is that both Bitcoin and Tesla have different levels of volatility compared to trillion-dollar stocks like Apple and Amazon. Additionally, stocks appear to have experienced a 60-day volatility peak in November 2020, while Bitcoin has been relatively quiet. Tesla is the exception rather than the norm.
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The 12 most volatile $200 billion market cap stocks. Originated from this. Investing.com
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12-month S&P 500 performance, 5-day chart. Source: TradingView
Zhao may be the founder of the leading cryptocurrency exchange, but he doesn't trade in person. Instead he recommends holding (HODL) rather than trading where possible.
Volatility is not a measure of returns
Analyzing volatility alone creates another big problem—the metrics ignore what matters most to investors, earnings. It doesn't matter if an asset is more or less volatile if, on average, it consistently returns higher than the others.
MicroStrategy has listed nearly every currency, stock index, and S&P 500 component, and curious analysts can compare returns and Sharpe ratios side-by-side with Bitcoin’s returns.
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As the data clearly points out, Bitcoin has been the winner across all major assets and indices on risk-reward metrics over the past 12 months. Similar results emerge if a 5-year time frame is used.
Therefore, Zhao may simply be wrong to point out that Bitcoin’s volatility is similar to the stocks of trillion-dollar companies. Yet when the metric is adjusted for returns, it is the undisputed winner.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading action involves risk. You should do your own research when making a decision.
Compilation: Bibabu
Compilation: Bibabu
