The investors are hoping bitcoin to serve as a “store of value” but the leading cryptocurrency still remains very volatile, Tom Jessop, head of FDAS [Fidelity Digital Assets], added within the Reuters Global Investment Outlook Summit 2020 recently on Thursday.
“We use the words ‘potential store of value’ as bitcoin remains extremely volatile, and by any standard perhaps wouldn’t achieve the mantle of real store usefulness,” added Jessop, whose firm, a unit of Fidelity Investments, offers cryptocurrency trading and custody services for financial firms and corporations. His remarks were reported by Reuters.
Jessop explained that while bitcoin’s volatility prevents it from acting as a reliable due to store value, “aspirationally” it might be one, and “that’s one among the explanations why numerous investors are now brooding about this space constructively.”
Presently, low trading volumes seem to possess kept bitcoin hovering around $19k after touching its all-time high of over $19,850 USD earlier this month.
While sharp price movements within a market can often scare investors as the volatility gets conflated with risk, what’s unique about bitcoin’s volatility is that unlike the volatility index [VIX] for the S&P 500, bitcoin’s VIX tends to be positively correlated with the asset’s price.
Also as per the October report regarding bitcoin’s market cap, FDAS revealed that due to bitcoin’s uncorrelated nature the cryptocurrencies market cap has ample space to grow.
“Within a world where benchmark interest rates globally are near, at or below zero, the chance cost of not allocating to bitcoin is higher,” the report added.