Comparing Bitcoin and Bitcoin mining stock volatility
| Mitch Klee
There has been a lot of talk about Bitcoin’s price volatility over the years. Some investors avoid Bitcoin simply because of this feature. Others find it attractive, using it as a gambling investment of sorts.
Bitcoin mining stocks have both higher highs and lower lows than Bitcoin, bringing a new meaning to the word volatility.
A calculation of Bitcoin’s annualized 60-day volatility compared to an average of the same top mining stocks (Hive, Bitfarms, Hut 8, Riot and Marathon) shows consistently higher volatility over time. Averaging the mining stocks together helps group them for better comparison against Bitcoin. (Bitcoin mining stocks were chosen based on performance ranking).
As explained in a recent Mining Memo article, “Comparing Bitcoin’s volatility to that of other assets,” we see that Bitcoin’s volatility is decreasing over time. Mining investors are likely hoping this to be the case with Bitcoin mining stocks in the future, but it has yet to be seen.
Comparing the prices of these mining stocks can give us an idea of how well they have performed against Bitcoin over the past 2.5 years. Of the selected assets, Riot, Marathon and Hive outperformed Bitcoin, while Bitfarms and Hut 8 underperformed it. But with these large price gains comes volatility, which may scare off some traditional finance investors who prioritize the relative stability of the stock market.
Volatility is neither good nor bad, but merely information that could be used when comparing assets. Indeed, Bitcoin itself has many properties that the stock market does not have, which likely causes this volatility. Exposure to Bitcoin mining stocks can have large benefits but also leaves some things to be desired compared to the original asset. But one thing is clear: it all follows Bitcoin.