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Bitcoin vs. US Dollar: Here's How the Dollar Compares to Bitcoin in terms of Volatility

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What do Old People and Fiduciary Coins Have In Common?

It's hard to stimulate older people to do anything new or change the way they did their things – and that's understandable. Fiat currencies now have these same attributes with our elders. Here's how.

A recent study by Alice Leng of Bank of America Corp. revealed that foreign exchange – or forex, which essentially means the exchange or conversion of one currency for another based on the values ​​of each participating currency – now responds to shocks in the market so less significant. Even when the foreign exchange market reacts significantly to shocks, it's usually not supported for a long time. It may take six times the effort it took 15 years ago to create volatility in the foreign exchange market, writes Leng in a note published Monday (October 9th). Low volatility in the foreign exchange market is evident According to Bloomberg, its volatility is 12% lower than its five-year average.

The recent low volatility of fiduciary currencies is in contradiction with Bitcoin, which has been criticized for its high volatility. Just about the central bank or the securities management agency globally warned that people should be cautious about Bitcoin and other digital currencies mainly because of their volatility. But, surprise, surprise, the fiduciary currencies have not always been stable. Take a little history of US dollar volatility as a case study.

The US Dollar

A good way to check the history of US dollar volatility is to check the US Dollar Index. The US Dollar Index tracks the value of the US dollar against the values ​​of a basket of six international currencies. Maintained by ICE Futures US, Inc., the US dollar index is averaged geometrically and tracks the value of the US dollar against the euro, the Japanese yen, the pound sterling, the Canadian dollar, the crown Swedish currency and the Swiss franc.

 Currency Index in US Dollars "src =" http://cointelegraph.com/storage/uploads/view/768186d11ec38b285a9da49264ceb555.png "title =" Price Index in US Dollars " /> </em> </p>
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Chart of the US dollar index since November 1985. Source: tradingview.com

Of course, this is a huge chart and it's hard to get anything out of it.First, I'd like to point out that, for the purpose of this article, we will associate volatility with significant and significant declines in the value of the US dollar. the value of the US dollar, since it is generally the main objective during the discussion of the flight

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 Index of currencies in US dollars 1985-1995 "src =" http: //cointelegraph.com/storage/uploads/view/013e66b8e5c0535b3c94a954c25e2ed1.png "title =" Currency Index in American Dollars 1985 -1995 "/> </p>
<p dir= 1985-1995

The graph above represents the decade between 1985 and 1995. The major sign of the volatility of the US dollar during this decade was in the overall decline in the value of the dollar between 1985 and 1987 – around the period that the debt crisis in Latin America hit. During those years, the US dollar index rose from about 124.99 to 85.42, a decrease of 31.7%. The value of the dollar has not quite increased in value for the rest of the decade, on a global basis.

 US Dollar Currency Index 1995-2005 "src =" http: // cointelegraph. com / storage / uploads / view / 4403b921c6111e9e8e342ca9238fd11b.png "title =" Index of the US currency 1995-2005 "/> </p>
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1995-2005

The graph below above represents the evolution of the US dollar index between 1995 and 2005. The US dollar once again showed signs of volatility between January 1, 2002 and December 1, 2004; 39, US dollar index rising from about 120.28 to 80.85, down 32.8% This period coincided with the dot-com bubble

 US Dollar Currency Index 2005-2015 "src =" http://cointelegraph.com/storage/uploads/view/19d39b965ce308d1c9639ecfd159a186.png "title =" US Dollar Currency Index 2005-2015 "/> </p>
<p dir= 2005-2015

Finally, we go from the decade between 2005 and 2015, as shown in the table above. The greatest sign of volatility during this decade occurred between November 2005 and March 2008 – at a time when the last global financial crisis became serious. During this period, the US dollar index dropped from about 91.57 to about 70.53, a decrease of 23%.

Please note that I examined only the most volatile cases in the decades considered here. . As the charts show, the US dollar has shown several signs of volatility over these decades. This is especially the case during the decade between 2005 and 2015.

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Comparison with the volatility of bitcoin

Yes, I agree, it's a senseless thing to do. But who knows what we could find. Again, for the purposes of this article, we will associate volatility with major and significant price falls.

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 Bitcoin Price Chart 1 "src =" http://cointelegraph.com/storage/ uploads / view / 089d93fa165267e29e967f44645ed8d0.png "title =" Bitcoin Price Chart 1 "/> </p>
<p dir= Chart showing the Bitcoin price movement of all time

Since Inception In 2009, Bitcoin rose from about $ 4.89 to a record high of $ 5767, which is one of the reasons why the digital currency is unpopular in most traditional investors.Jaime Dimon

Bitcoin rose as a result of a series of 39 events, one of the highlights being the approval of Bitcoin by the People's Bank of China in November 2013. After the approval of the Chinese central bank, Bitcoin continued to record a record high of & quot; About $ 1,242 before the end of November 2013.

 Price graph of Bitcoin 2 "src =" http://cointelegraph.com/storage/uploads/view/1bf72d1306037853417ea3970ed19dfd.png "title =" Bitcoin Price Chart 2 "/> </p>
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two major events – the battles of the exchange of bitcoins at the time MT Gox and the Chinese central bank banning financial institutions from using Bitcoin – triggered the first volatile bitcoin price move. Between November 29, 2013, when Bitcoin recorded the highest of $ 1,242 and December 18, 2013, Bitcoin had lost approximately 54.8% of its value. Although it recovered some of the losses at the beginning of 2014, the digital currency reached $ 386.20 in April 2014, a decrease of 60% from a peak of $ 958 in January 2014. During next year, Bitcoin would continue its downward trend. record lowest of the last three years of about $ 192

 Bitcoin 3 price chart "src =" http://cointelegraph.com/storage/uploads/view/b7f364809221117b9e89c0bd943a8cf7. png "title =" Bitcoin price chart 3 "/> </p>
<p dir= Bitcoin has started to rally again in 2016, increasing by about 138% in 2016. The most important drop observed in 2016 was a 19% drop between June 19th and June 23. We can say that 2016 was a relatively stable year for Bitcoin

At the time of writing this report, Bitcoin had reached an excellent score of 478% since January 1, 2017. Despite this huge gain, the biggest drop The price of Bitcoin was 33% – between September 1 and September 14, 19459004

What can we deduce?

The short answer is that the largest volatility movements of Bitcoin are more intense as volatility movements of the dollar historically. And this should not be a surprise to anyone. First, the longest overall downward trend in the US dollar index that led to the largest decline in the value of the US dollar was observed between January 2002 and December 2004. It is almost three years. By comparison, the strongest downward trend of Bitcoin that led to the largest price decline was between January 2014 and April 2014 – about three months. Digital currency lost about 60% of its value during this period. Over the last three decades, the US dollar has not lost as much of its value in a few months. In addition, the longest downward trend of Bitcoin lasted between November 2013, when it peaked at around $ 1,242 and January 2015, when Bitcoin hit a low of about $ 192 – a drop of 85%. So, again, the volatility of the dollar is nothing compared to the volatility of Bitcoin.

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A bright spot for Bitcoin

 Daily Transactions "src =" http://cointelegraph.com/storage/ uploads / view / b9a619cc476b9c48c9dc1788d8090204.png "title =" Daily Transactions " /> </p>
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Bitcoin volume of transactions

Yes, Bitcoin has been volatile and remains very volatile.However, as we have already mentioned, the decline more marked bitcoin price in 2016 was only 19%, and the sharpest decline in the price of Bitcoin.Till in 2017, the Chinese government severely repressed Bitcoin in September, a more important event that in 2013, when the price of bitcoin dropped by nearly 55% after the Chinese government banned financial institutions from using Bitcoin.The increased stability is mainly due to the fact that the volume of transactions of Bitcoin has increased significantly by port to 2013 – as shown in the Bitcoin volume chart above.

Pulling all together, as we all learned over time, Bitcoin is very volatile and more volatile than anything we've seen with the US dollar. However, as the volume of transactions increased, stability elements were introduced. And it is sure that the more Bitcoin's trading volume is stable, the more stable its price will be.

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