29 Apr 2014
Why Bitcoins volatility is unique among commodities - Coindesk
FXStreet (London) - Danny Bradbury, Coindesk Analyst comments that a single bitcoin broke the price of an ounce of gold five months ago and now, it’s worth less than half that – and, of the two, it’s bitcoin’s price that’s bouncing around the most.
Key Quotes
“For people trying to evaluate bitcoin’s potential against other commodities, its relative price volatility could be a worry or an opportunity, depending on your appetite for risk. Kirill Gourov, Director of Finance for Blocktech pointed out that it is difficult to find a direct correlation between bitcoin and other commodities.”
“Copper’s recent price drop looks dramatic, for example, but it represented a 9% decrease in its value. That may be considerable, but it’s hardly in line with some of bitcoin’s more dramatic yo-yoing. In five or 10 years, when the market is more developed, trends will be more prevalent and will force bitcoin to spike less, Krill suggested. But, today, the market is too easily manipulated.”
“George Samman, Chief Operations Officer at BTC.SX notes that there are correlations today between bitcoin and at least one other commodity, Samman said, but they’re only obvious if you turn them on their head. They are negative correlations, and we see them particularly between bitcoin and gold. When bitcoin goes up, gold falls, and vice versa, he suggested.”
“The link between bitcoin and gold makes sense. When the market flies from bitcoin, it has to go somewhere, and the argument goes that gold gets some of that action. If you see negative correlations in this chart, then why do they exist? It’s because Gordon Gecko was only half right. Greed isn’t the only factor driving financial markets: the other is fear. ItBit’s Lewis calls gold a ‘fear asset’, and said that in time, it will make sense to compare bitcoin against the VIX.”
“In particular, the tendency towards quantitative easing – central banks creating more money – and the spectre of rising interest rates come to bear here. “This all bodes well for bitcoin to spike again as well,”
“We’re starting to see markets for bitcoin derivatives emerge, such as BTC.SX. More will come, said Gourov, although the market is too immature to support complex trades yet.”
Key Quotes
“For people trying to evaluate bitcoin’s potential against other commodities, its relative price volatility could be a worry or an opportunity, depending on your appetite for risk. Kirill Gourov, Director of Finance for Blocktech pointed out that it is difficult to find a direct correlation between bitcoin and other commodities.”
“Copper’s recent price drop looks dramatic, for example, but it represented a 9% decrease in its value. That may be considerable, but it’s hardly in line with some of bitcoin’s more dramatic yo-yoing. In five or 10 years, when the market is more developed, trends will be more prevalent and will force bitcoin to spike less, Krill suggested. But, today, the market is too easily manipulated.”
“George Samman, Chief Operations Officer at BTC.SX notes that there are correlations today between bitcoin and at least one other commodity, Samman said, but they’re only obvious if you turn them on their head. They are negative correlations, and we see them particularly between bitcoin and gold. When bitcoin goes up, gold falls, and vice versa, he suggested.”
“The link between bitcoin and gold makes sense. When the market flies from bitcoin, it has to go somewhere, and the argument goes that gold gets some of that action. If you see negative correlations in this chart, then why do they exist? It’s because Gordon Gecko was only half right. Greed isn’t the only factor driving financial markets: the other is fear. ItBit’s Lewis calls gold a ‘fear asset’, and said that in time, it will make sense to compare bitcoin against the VIX.”
“In particular, the tendency towards quantitative easing – central banks creating more money – and the spectre of rising interest rates come to bear here. “This all bodes well for bitcoin to spike again as well,”
“We’re starting to see markets for bitcoin derivatives emerge, such as BTC.SX. More will come, said Gourov, although the market is too immature to support complex trades yet.”