Embracing Bitcoin's Volatility: Why price fluctuations shouldn't scare investors

So, why is Bitcoin's price so volatile if the asset itself is not changing? The answer lies in the old truism: Beauty lies in the eyes of its beholder. The fact that a large majority of the world's capital has yet to grasp the true value of Bitcoin. Some perceive it as worthless, while others believe it to be worth millions per coin. This vast disparity in perception and understanding is the root cause of Bitcoin's volatility.

Over the last decade and half, Bitcoin has experienced an astonishing compound annual growth rate of 140%, a figure that seems absurdly high. However, this is a direct result of Bitcoin's and acceptance as a superior form of money. Bitcoin set new all-time highs in 14 countries just two months ago. Countries like Argentina, Burundi, Congo, Egypt, Ghana, Japan, Laos, Lebanon, Malawi, Nigeria, Pakistan, Sierra Leone, Sudan, and Turkey have all witnessed Bitcoin reach unprecedented price levels. As more people recognize the advantages of Bitcoin and move a significant portion of their wealth into this , its value relative to fiat currencies continues to rise.

The recent $11,000 drop in Bitcoin's price, which caused concern among some , is a mere blip when viewed in the context of Bitcoin's history. Just four years ago, in March 2020, Bitcoin traded for less than $8,000. This is not a sign of instability but rather a reflection of Bitcoin's rapid global adoption over the past 15 years.

Interestingly, Bitcoin's volatility mirrors that of Amazon.com, one of the most successful public companies. Amazon's stock, which has been publicly traded for 26 years, has exhibited the same 80% volatility as Bitcoin. In every year of its 26-year history, Amazon has experienced double-digit drawdowns, with an average peak-to-trough decline of 31%.

This comparison (with the benefit of hindsight) highlights an important perspective: volatility is not inherently negative, and it is often a necessary component of growth and innovation. Just as Amazon's volatility did not deter its long-term success, Bitcoin's volatility should not be seen as a deterrent but rather as a natural byproduct of its rapid adoption and disruptive potential.

While the volatility of Bitcoin can be unsettling, it is crucial to remember that nothing can grow exponentially in a straight line. Bitcoin's are a reflection of its meteoric rise and the ongoing process of global adoption. As more individuals and institutions embrace Bitcoin as a superior form of money, its price is likely to continue its upward trajectory, albeit with periods of volatility and corrections along the way.

Bitcoin's volatility is not a sign of inherent instability but rather a testament to its rapid growth and the world's gradual recognition of its value. By understanding Bitcoin's unique nature and its journey, investors can gain a more informed perspective on its volatility and make more educated decisions regarding their exposure to this revolutionary asset.

(The author is Vice President of )

Source: Forex-Markets-Economic Times