Decreasing Bitcoin price volatility - page 2.

pooya87

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Quote from: tinopener on February 16, 2021, 06:07:48 PM

I've read a couple of times recently that institutions coming on board is going to make the price less volatile.

Since none of them are actually participating in the market they can not affect the price either. It is something similar to all the OTC trades that never had any meaningful effects on bitcoin price. In fact these institutional investors are also OTC trading instead of going on an exchange and placing buy/sell orders which means they can not affect the price. Not to mention that after they buy bitcoin they go away and create their own centralized market where they customers buy bitcoin from them and receive IOUs again not affecting anything about bitcoin.

Quote

-Institution buys $1bn worth of Bitcoin.
-Bitcoin price jumps up.

One time purchace, one time jump!

Quote

-Institution holds that Bitcoin essentially taking it off the market.

less than 20000 ($1 billion) bitcoin taken off the market is not a big deal!

Quote

-Buyers' money now equates to smaller units of Bitcoin (e.g. 0.9 BTC instead of 1 BTC).
-Those smaller transactions affect the overall price less.

The amount of money and the size of the order books didn't change in your scenario hence the volatility doesn't change.

Innerpumper

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because institutions will not manipulate the price of bitcoin. They come in and properly invest it won't make bitcoin go up directly. But it will look stable and skyrocketing. and I think it would be right to look flying after a few months they come in. Currently, we are only entering the second month of 2021. It's just a presede, man, it's a good start.

mk4

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Paldo.io 🤖

Quote from: tinopener on February 16, 2021, 06:07:48 PM

“As the prices are going higher, you are drawing in new types of investors with stronger hands,” noting that some level of volatility will likely remain."

This quote is pretty spot on. Don't get me wrong, volatility won't be leaving bitcoin for a good amount of time, but institutional investors and corporations getting in gives me a bit more hope that there's probably slightly more chances that we won't be seeing like past levels of huge drops in price. Institutional investors and corporations are simply not like retail investors that panic at every huge drops in price.

MrMcKinney

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Volatility has become a name for BTC, we're not actually decreasing in volatility but rather adding up to it.

wxa7115

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Bitcoin is GOD

Quote from: Bitcoin_Arena on February 16, 2021, 06:36:06 PM

Volatility has nothing to do with money getting taken off the market. If this was the case with the increased adoption of bitcoin as compared to a decade ago, you would think the markets be less volatile now, but it's still the same as 10 years ago.

Price Volatility has more to do with the traders (People buying and selling) and how much they are buying or selling. Those who HODL the coins will keep them, but they won't affect how volatile the market prices will be.

Bitcoin is not just limited to 1 BTC, one can still own and easily transfer mBTC, bits, sats etc

To all of these I will add leverage, if traders were not allowed to use leverage then in a way the volatility could be reduced somehow by the fact that we have more holders that are not willing to move their coins, but when people that have one bitcoin are allowed to use 100 times that amount in leverage and you multiply this many times over by the thousands then we can clearly see why the volatility does not decrease.

And if to this equation we add that the supply of bitcoin is way more rigid than what you can see in fiat currencies and also that the demand explodes from time to time then I think it is safe to say that the volatility of bitcoin will not decrease significantly for a very long time.

tinopener

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Quote from: sheenshane on February 16, 2021, 06:58:56 PM

Speaking of the denomination of Bitcoin, here's Bitcoin Table Unit.

Thanks. Yep, I hold Bitcoin and know about the divisibility. I just used 1btc and 0.9btc as an example to demonstrate less dollar purchasing power as the price increases.

Anyway.... I've edited the OP with an example of one of the articles where I read about this possible decrease in volatility.

sheenshane

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Volatility is a normal thing in Bitcoin, because of the fact that there's no infinite growth of Bitcoin price, it has sometimes a pullback right after having a massive plunged in the market. Those who have a long experience in Bitcoin holding must know about this situation and they are already aware that Bitcoin has always a price manipulation.

If Bitcoin keeps going higher it means the demand has been increased, and the value that pegged to the dollars also increased the reason Bitcoin becomes so expensive, that why there's a fraction number that easily to divide and determine the value of per Bitcoin if ever there's someone who wants to transact with a tiny amount using Bitcoin.

Speaking of the denomination of Bitcoin, here's Bitcoin Table Unit.

Willitivity

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Quote from: tinopener on February 16, 2021, 06:07:48 PM

I've read a couple of times recently that institutions coming on board is going to make the price less volatile.

Assuming it is true, does it work (very loosely) something like this?

-Institution buys $1bn worth of Bitcoin.
-Bitcoin price jumps up.
-Institution holds that Bitcoin essentially taking it off the market.
-Buyers' money now equates to smaller units of Bitcoin (e.g. 0.9 BTC instead of 1 BTC).
-Those smaller transactions affect the overall price less.

Bitcoin is actually more volatile these days compared to earlier. What I mean is that we have much more bigger price swings these days. it's not about the fact that we have institutional investments, but because cryptocurrency markets have evolved in the last few years. I also agree that smaller transactions have little to no impact on the overall market. Barely affects the volatility.

Quote from: Bitcoin_Arena on February 16, 2021, 06:36:06 PM

Price Volatility has more to do with the traders (People buying and selling) and how much they are buying or selling. Those who HODL the coins will keep them, but they won't affect how volatile the market prices will be.

Yes, coins in cold wallet plays no role in market volatility since it's not actively used to trade. Similar to the way institutions hold bitcoin assets. It only gets bitcoin volatile when they send to exchange and trade it.

Bitcoin_Arena

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฿itcoin for all, All for ฿itcoin.

Volatility has nothing to do with money getting taken off the market. If this was the case with the increased adoption of bitcoin as compared to a decade ago, you would think the markets be less volatile now, but it's still the same as 10 years ago.

Price Volatility has more to do with the traders (People buying and selling) and how much they are buying or selling. Those who HODL the coins will keep them, but they won't affect how volatile the market prices will be.

Bitcoin is not just limited to 1 BTC, one can still own and easily transfer mBTC, bits, sats etc

tinopener

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I've read a couple of times recently that institutions coming on board is going to make the price less volatile.

Assuming it is true, does it work (very loosely) something like this?

-Institution buys $1bn worth of Bitcoin.
-Bitcoin price jumps up.
-Institution holds that Bitcoin essentially taking it off the market.
-Buyers' money now equates to smaller units of Bitcoin (e.g. 0.9 BTC instead of 1 BTC).
-Those smaller transactions affect the overall price less.

Edited 00:05am Here is an article I just found describing the phenomenon in better detail:

"There are all kinds of reflexive dynamics in these assets that ironically will lead to less volatility the higher they go,” Peters said in an interview during Bloomberg’s The Year Ahead conference. “As the prices are going higher, you are drawing in new types of investors with stronger hands,” noting that some level of volatility will likely remain."

https://www.bloomberg.com/news/articles/2021-01-28/crypto-whale-one-river-says-volatility-to-ease-as-prices-rise

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