This is an excerpt from CoinDesk newsletter 'Daybook.' Sign up here, if you haven't already.
Earlier this week, CoinDesk discussed how risk management in bitcoin is becoming increasingly popular, steadily reducing the the largest cryptocurrency’s volatility and making it more palatable to professional investors.
That raises a question. How does its stability compare with major assets such as gold, its traditional rival, with the S&P 500, the biggest stock index, with the euro-dollar exchange rate, the most liquid fiat currency pair, and with Nvidia , the largest stock by market value? That comparison matters when deciding whether an asset can diversify a portfolio or increase portfolio volatility risk.
It transpires there is still a long way to go before bitcoin can match the euro-dollar, gold and stock indexes in terms of stability.
That’s according to a widely tracked metric called realized volatility, which measures how much an asset's price has moved over a period, such as 30 or 90 days. The gauge is the standard deviation of daily returns, usually annualized to show what a full year of such moves would look like. The higher the number, the bigger the swings and the stronger the perception that the asset is risky.
Bitcoin's 90-day realized volatility stood at about 38% as of Thursday, based on CoinDesk's calculations. Its main rival, gold, is at about 23.5%. The S&P 500 sits at about 11%, so bitcoin is a little over three times as jumpy as stocks.
Source link
