Bitcoin is well known for its volatility, with many analysts using the claim as a rationale for not investing.

The same volatility Bitcoin has is not unusual among other assets, however. Comparing certain mainstream assets' and emerging currencies' volatility (VOL) – defined as the variance in price on an annualized basis – against Bitcoin's volatility can give glimpses into where Bitcoin might be adopted next and why it would be adopted.

Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any investment or to adopt any investment strategy.

Bitcoin volatility versus other markets

When comparing the VOL of Bitcoin to other markets, it is noticeably higher at certain points. But there have also been plenty of instances where Bitcoin’s and the broader market’s VOL have been comparable. For example, oil, gold and real estate’s VOL have all exceeded Bitcoin’s at one point or another. Comparing the VOL in these assets gives a good idea of the VOL someone would experience if they were to use Bitcoin as an alternative investment or savings device.

Because someone is holding assets, they may be able to weather higher VOL over the long term.

Emerging currencies

It is one thing for an asset to be at a particular VOL, but what about currencies?

In both 2016 and 2020, emerging currencies (ECs) not only had higher VOL than Bitcoin, but the VOL was often created by inflation.

Comparatively, Bitcoin’s VOL tends to swing to the upside, giving it a major advantage in emerging markets. Money to money, Bitcoin's VOL could likely trend lower given its finite supply.

This comparison matters for a few reasons. For one, emerging currencies are the most susceptible to Bitcoin adoption as explained in the “Leapfrog thesis,” wherein some countries are more inclined to adopt Bitcoin due to how backward their current banking and currency systems are.

Bitcoin volatility over time

Another way to think about VOL is to look at it over the lifetime of Bitcoin. Bitcoin VOL has huge fluctuations, even when adjusted for the 180-day moving average. Bitcoin often holds low VOL for an extended period of time only to skyrocket due to price appreciation.

Bitcoin’s average VOL has decreased significantly from 2011 to 2022. As the asset gains more volume, there are fewer large fluctuations in price. Assuming this trend continues, Bitcoin will become less erratic over time and therefore become more attractive to countries with emerging currency.

Bitcoin is still relatively young at 13 years old, but its decreasing volatility shows its maturity. If the trend of lowered VOL continues, Bitcoin could one day surpass many emerging currencies as it becomes the attractive currency alternative.