Oil Is Now More Volatile Than Bitcoin

You know that the oil markets have truly gone to the dogs when they are suddenly riskier than one of the world’s most volatile commodities: bitcoin (BITCOMP).  

Bitcoin and most cryptocurrencies are synonymous with extreme bouts of volatility. However, it’s crude oil (OIL) that is now earning that dubious distinction after exhibiting price swings wilder than even the leading cryptocurrency.

On February 10, West Texas Intermediate (WTI) oil’s one-month realized, or historical, price volatility stood at 105.3%. In contrast, bitcoin's historical volatility clocked in at 42.3%, its lowest reading since September, according to Skew Markets.

Historical volatility is a measure of how much commodity prices have varied in the past calculated as the standard deviation of daily price movements of the front month futures price, typically for a 30-day period. The metric is expressed as a percentage in annualized terms.

Rising Volatility

A commodity’s historical volatility, however, does not tell us anything about the direction of the price movement; rather, it tells us the degree to which a security’s price movement is deviating from the average. 

It would, therefore, not be a stretch to say that crude oil’s volatility has lately exceeded that of bitcoin.

During the period under review, WTI’s historical volatility shot up from 38.7% to 119.6% by late January while S&P 500 Index’s (SPX) realized volatility increased to 15.6% during the last week of January.

In contrast, BTC’s volatility retreated from 66% to 42%--hardly surprising given that BTC tends to benefit from flight to safety trades.

That said, don’t rush to dump your gold holdings to buy some BTC just yet.  Despite its falling volatility, bitcoin remains considerably more volatile than gold (GLD), one of the commodities that has traditionally been regarded as leading safe haven assets. 

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Disclaimer: OilPrice.com provides background information on oil and gas commodities and related companies. It also offers direct links to the web sites of the companies concerned where ...

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