Why Bitcoin’s volatility is a long-term advantage—and how its price swings are gradually decreasing with each cycle.
Since 2009, skeptics have found countless reasons to criticize Bitcoin—most of them rooted in a lack of understanding.
Now, after several ETFs have been approved in the U.S. and the American administration has officially announced the formation of a Strategic Bitcoin Reserve, many of the classic arguments against Bitcoin—like “it has no intrinsic value” or “there’s nothing behind it”—are starting to fall apart. Even the misleading claims like “Bitcoin uses too much energy” or “Bitcoin is bad for the environment” are losing ground, thanks to growing evidence that Bitcoin mainly uses surplus energy, helps renewable energy companies become more profitable, and even contributes to environmental cleanup by emitting CO₂ instead of methane (which, over a 20-year timeframe, is 80 times more harmful than CO₂).
That said, some criticisms still persist—one of the most common being: “Bitcoin isn’t a good investment because it’s too volatile and therefore too risky.”
Bitcoin and volatility
Let’s be clear: “Bitcoin is volatile in the short to medium term“, and for that reason, it’s not a great investment if your time horizon is short. On a daily basis, Bitcoin’s price can swing 5–10%, and monthly fluctuations can reach 20–30%.
But the picture changes drastically with a longer time horizon—say, four years. If we look at the weekly average price over the past 200 weeks (about four years), Bitcoin clearly acts as a strong store of value, following a steadily rising curve. This means that anyone who has consistently bought Bitcoin and held it for at least four years has ended up in profit.
As Bitcoiners often recommend, every Bitcoin investment plan should follow two simple rules:
- Investment period > 4 years;
- DCA (Dollar Cost Averaging): instead of buying all at once, invest regularly—weekly, bi-weekly, or monthly—to smooth out both highs and lows.
By following these two basic rules, Bitcoin has so far outperformed 99% of the portfolios managed by any financial advisor.
Volatility is good in the long run
The same volatility that makes Bitcoin risky in the short term is exactly what makes it the best-performing long-term asset. It’s because of this volatility that Bitcoin has gone from $0 to $1,000, then to $10,000, and now to nearly $100,000—reaching a market cap of $2 trillion.
Without volatility, these long-term gains wouldn’t have been possible.
Why Bitcoin is volatile
Bitcoin is volatile for several reasons:
- Intrinsic volatility: It’s an asset that started with zero value and is on a multi-decade trajectory to become the most valuable asset in the world—potentially surpassing gold, which has held that title unchallenged for over 5,000 years.
- New technology not yet well understood: Like every new technology, it is initially understood by very few. As a result, the vast majority of people consider it a Risk-On asset—similar to “tech” stocks—when in reality, it should be regarded as a safe-haven asset, like gold.
- 24/7 accessibility: While traditional markets are open 7–8 hours a day, 5 days a week, Bitcoin can be traded 24 hours a day, 7 days a week, including holidays. This encourages even more short-term speculation by traders.
- Use of leverage: Many traders use leverage to maximize their gains. Since Bitcoin can move 5%–10% in a single day, many of these traders get liquidated—further amplifying volatility.
Volatility is decreasing with each cycle
Although it remains highly volatile, it’s clear that Bitcoin was much more volatile during the 2009–2013 cycle, and that volatility has decreased with each successive cycle. This is because more and more people have understood Bitcoin (and thus buy and HODL), and the percentage of short-term speculators continues to shrink over time. Additionally, as Bitcoin’s market cap grows, it takes significantly more capital to move the price—making major swings less likely.
When talking about Bitcoin and volatility, it’s crucial to define the time frame. While it’s true that Bitcoin is highly volatile in the short to medium term, in the long term volatility decreases—and tends to only be noticeable on the upside. Instead of focusing on daily or weekly prices, one should look at the weekly average over the last 200 weeks (roughly 4 years), a curve that has consistently pointed upward, week after week, since the very first cycle.
Before buying Bitcoin—regardless of the amount—the investor must be prepared, both financially and psychologically, to not sell for at least four years, regardless of volatility. Otherwise, this is not a sound investment—it’s a risky speculation.
Final recommendation
The first and most important piece of advice Bitcoiners give to those interested in Bitcoin is: study Bitcoin thoroughly and hold a percentage of Bitcoin in your portfolio that matches your level of education.
So, if volatility feels excessive or stressful, it means that your allocation to Bitcoin is too high for your current level of understanding. In that case, the investor should choose one of the following options: continue studying Bitcoin until the current allocation no longer causes emotional stress due to short-term price movements (or, reduce the Bitcoin allocation until volatility is no longer psychologically overwhelming).
