Bitcoin is ‘a dinghy in the open ocean’

Record-breaking Olympic champion Michael Phelps (top R) and members of the U.S. National Swim Team participate in Surf Passage at Naval Special Warfare Center at Naval Amphibious Base Coronado, California, March 19, 2009.REUTERS/Blake R. Midnight/U.S. Navy/Handout

• Bitcoin has been plagued by extreme volatility.
• European COO of exchange BitFlyer says big moves down to therelative size of bitcoin market compared to other assets.
• Foreign exchange is like an “oil tanker on the open sea,” while “bitcoin, relatively speaking, is like a dinghy.”
• Expects volatility to decline as the cryptocurrency grows.

LONDON — Why is bitcoin so volatile?

The cryptocurrency captured headlines in the run-up to Christmas due to its rapid rise, climbing from around $5,000 at the start of November to a high above $19,000 in December?

It fell back from its highs and a cryptocurrency “bloodbath” in recent weeks has seen it fall back to around $10,000. Moves of 5% or even 10% on a day are not unusual.

Critics claim that the currencies extreme volatility make it not fit for purpose as a method of exchange and some retailers have in fact stopped accepting it as a result.

But Andy Bryant, the European COO of bitcoin exchange BitFlyer, says that the current volatility is simply a symptom of bitcoin’s evolution and will not be a permanent feature.

“Of course, objectively, bitcoin is volatile,” Bryant told Business Insider. “But when I talk about volatility I like to zoom out a bit and take a step back. Bitcoin as an asset class is still only, give or take, $200 billion. Cryptocurrency as a whole, including bitcoin, is $600 billion.”

Andy Bryant, COO of BitFlyer Europe.BitFlyer

“If you look at just one company, Apple, they’re $900 billion. Bitcoin is less than a quarter of an Apple. It’s only two Warren Buffets.

“You could keep going — look at the global gold market, $8 trillion; global stock markets are $75 trillion; global currency markets $90 trillion; real estate is $200 trillion, that’s already 1,000 times bitcoin’s market cap.

“The point of all this is if you take just one of those things, for example, the foreign exchange market. I liken those assets to like an oil tanker on the open sea. When you have an oil tanker and you have waves of capital sloshing in and out, the oil tanker will barely budge.

“Bitcoin, relatively speaking, is like a dinghy. The same walls of money coming and going are going to cause it to bob up and down. That’s how we see volatility.”

Bryant’s point is that the bitcoin and cryptocurrency markets are relatively small, so market moves create outsized price shifts compared to other asset classes. He expects bitcoin’s volatility to decrease as the cryptocurrency becomes more mainstream.

“It’s simply a sign of bitcoin’s relative youth compared to other asset classes and as bitcoin continues to enter the mainstream we’d expect the volatility to decrease,” he told BI.

“I think it’s going to be a big year. I think we’re going to see more futures products come online, we’re going to see potentially the first proper ETFs come online, we’re going to see more funds announcing that they’re going to invest even just a tiny piece of their portfolios into cryptocurrencies.”

Bryant was speaking to Business Insider at London Blockchain Week, where Japanese company BitFlyer announced the launch of its European operation.