During an interview with Bloomberg TV on May 3, Binance CEO Changpeng Zhao suggested that Bitcoin (BTC) “is probably less volatile” than the stock prices of Apple (AAPL) and Tesla (TSLA).
Zhao argued that crypto's volatility was not unlike the stock market, adding: that “volatility is everywhere” and that “it is not unique to crypto.”
However, those involved in cryptocurrency trading probably know that cryptocurrency prices fluctuate a lot more than listed trillion-dollar companies. This begs one to question whether or not Zhao is detecting a trend that some may have missed？
Both Bitcoin and Tesla share different volatility levels when compared to trillion-dollar stocks like Apple and Amazon.
Moreover, stocks seem to have experienced a 60-day volatility peak in November 2020, while Bitcoin was relatively calm.
Tesla is an exception rather than the norm
Another thing to consider is that Tesla's market capitalization is $633 billion, and it has yet to post a quarterly net income above $500 million. Meanwhile, every single top-20 global company is incredibly profitable. These include Microsoft (MSFT), Google (GOOG), Facebook (FB), Saudi Aramco (ARAMCO.AB), Alibaba (BABA), and TSM Semiconductor (TSM).
Zhao may be the founder of the leading crypto exchange, but he doesn't personally trade. On the contrary, he actually recommends holding (HODL) instead of trading in every instance possible.
Volatility does not measure returns
Exclusively analyzing volatility presents another big problem. The indicator leaves out the most important metric for investors, the return. Whether an asset is more or less volatile doesn't matter if, on average, one asset consistently posts higher gains than others.
MicroStrategy has listed almost every currency, stock index, and S&P 500 index component, and curious analysts can compare returns and the sharpe ratio side-by-side with Bitcoin's.
“The Sharpe ratio is a measure of risk-adjusted (really volatility-adjusted) returns. It is a way to measure how much return an investment generated for the risk (volatility) endured over some time horizon.”
Bitcoin is the winner on risk-return metrics against every major asset and index over the past 12 months. A similar outcome also takes place when using a 5-year timeframe.