When it comes to taking positions on major digital currencies such as Bitcoin, traders know that volatility is implied; it is not only dialed in but also highly expected. Active traders, who happen to be the most numerous participants in the cryptocurrency markets, actually thrive on this volatility because it gives them opportunities to realize quick profits. What if we were to tell you that some stocks that trade on Wall Street are just as volatile as Bitcoin?
As an investment commodity, Bitcoin has many problems, but volatility may be the least concerning. According to statements recently attributed to the CEO of the Binance cryptocurrency trading platform, volatility is not as bad as you and I think. Naturally, this is the kind of talk you would expect from the CEO of a company that makes money on each Bitcon transaction, but Changpeng Zhao actually qualified his statement, which was made during an interview with Bloomberg TV, with data.
What Mr. Zhao was referring to was the hectic Wall Street week of November 2020. As you can remember, this was when the contentious presidential elections unfolded in the United States, and they did so in the midst of one of the worst periods of the coronavirus pandemic in North America. Zhao pulled out charts showing the volatility of major tech stocks such as Apple, Amazon, and Tesla Motors during the month, and he was absolutely right: Compared to Bitcoin in that period, they were roller coasters.
We can say that Zhao has a point; however, he probably chose the wrong trading period to substantiate his point. The fact of the matter is that high volatility is a major reason why the Securities and Exchange Commission has yet to approve the numerous applications filed to launch a Bitcoin exchange-traded fund.
The bottom line of Bitcoin volatility is that it is not overrated. It is very real, and traders should be mindful of it. This does not mean that Wall Street is afraid of Bitcoin because it can be a volatile instrument. In fact, Wall Street thrives on volatility, and various hedge funds have already taken the Bitcoin plunge.