Cryptocurrency Volatility - An Update

SummaryBitcoin’s volatility has continued to decrease over time, as measured by both its own volatility and its volatility in relation to the S&P 500.Bitcoin’s volatility was lower than that of the five other cryptocurrencies that I analyzed.Bitcoin’s volatility was higher than all of the individual stocks I used for comparison, with the exception of the two crypto mining stocks.Bitcoin’s compound annual return since my previous article has been nearly double that of SPY. However, returns for four of the five other cryptocurrencies I examined were even higher.Correlations between cryptocurrencies and between crypto and stocks seem to have increased.Five years ago, I wrote a Seeking Alpha article titled Cryptocurrency Volatility Lessons in which I showed that although cryptos are characterized by high volatility, the volatility was steadily declining. I also showed that cryptos were weakly correlated with equities, offering a desirable portfolio risk reduction possibility. I conjectured that volatility of cryptos would continue to decline, and that, perhaps in five years, a substantial number of investors would be willing to place 1-5% of their portfolios in crypto assets.This article provides an updated analysis. Some of the earlier lessons still apply, but there have also been some significant changes. My perspective is basically that of an investor primarily interested in equities, but willing to consider the addition of som...