Exploring Bitcoin's Volatility

Volatility is a Feature, not a Bug

One of the enduring criticisms against Bitcoin is that it is volatile. I've heard this for over a decade. Let's dive into and take a quick look at Bitcoin's volatility.

Volatility is a statistical measure that captures the variability of returns. There are many different such measures. One such measure is the standard deviation of weekly returns. As a simple benchmark, let's look at Bitcoin's weekly returns against the S&P 500:

Since 2020, Bitcoin has had at least one week of a drop of -40%, and 4 weeks of drops greater than 20%. But it also had one week of a gain greater than 30% and a dozen weeks above 20%. The S&P 500, on the other hand, barely has any weeks outside of a gain of 10% or a loss of  -10%.

This may not surprise, since the S&P is an index of 500 stocks. How does Bitcoin compare to specific companies? Here is the weekly return of Bitcoin against BRK-B, the class B shares of Berkshire Hathaway from 2020 to now: