Trace Mayer argues that Bitcoin's reduced volatility reflects its maturity and attracts institutional investments, enhancing its economic significance.
Bitcoin's Decreasing Volatility Signals Economic Maturity, Says Trace Mayer
Trace Mayer, a prominent Bitcoin investor and creator of the Mayer Multiple, argues that the cryptocurrency's declining volatility is a positive development, reflecting its growing economic significance and attracting larger investments.
Bitcoin's volatility has dropped significantly, from about 120 in 2017 to around 35 recently. This shift is attributed to increased institutional participation and the stabilizing effects of options markets. Mayer believes that this reduction makes Bitcoin more appealing to corporations and institutional investors.
In a recent interview, Mayer emphasized that a decrease in volatility should not be seen as a sign of weakness but rather as an indicator of Bitcoin's maturation. He noted, “The barbell is getting heavier,” referring to the growing liquidity in the market.
A significant factor contributing to this stabilization is the options market, where institutions are increasingly engaged in selling covered calls on their Bitcoin holdings. This practice helps to mitigate price volatility by establishing a natural ceiling on price surges.
Mayer also discussed the Mayer Multiple, a metric he developed to assess Bitcoin's price relative to its 200-day moving average. Currently, the ratio is slightly below its long-term average, indicating a more stable price environment compared to earlier periods.
Despite some ongoing concerns about network security and the potential impact of quantum computing, Mayer remains optimistic about Bitcoin's capped supply of 21 million, positioning it favorably against gold. He asserts that for Bitcoin to gain broader acceptance, it needs to exhibit stability similar to gold's. “To gain that acceptance, the asset needs to be somewhat dull, like gold,” he stated.
Mayer acknowledges that while there are challenges ahead, such as maintaining miner security and the risks posed by quantum computing, he firmly believes in Bitcoin's superiority over gold in the long term. He argues that Bitcoin's fixed supply differentiates it from gold, where higher prices typically lead to increased supply.
