Crypto Volatility is Tamer Than You Think! | by The Risk Protocol | The Capital | Feb, 2025
Crypto is infamous for its volatility. How does the volatility of ETH and BTC, the dominant crypto duo, compare with the most volatile stocks in the S&P 500? We did a quick analysis looking at their respective volatilities in 2024 and over the last 10 years, and the trendline is unmistakable.
Volatility is commonly measured using standard deviation or average true range (ATR). For this analysis, we use the annualized standard deviation of daily log returns over the past year.
In 2024, the most volatile S&P 500 stock was Super Micro Computer, Inc., a technology company, with an annualized volatility of 119%. It exhibited more than double the volatility of Bitcoin (53%). The second most volatile S&P 500 stock was Global Life Inc., a financial services holding company specializing in life and supplemental health insurance products, with an annualized volatility of 84%. The remaining top 10 most volatile stocks in the S&P 500 had volatilities ranging from 56% to 64%. Ether’s volatility (64%) matched that of Dexcom and Enphase Energy, the securities with the 3rd and 4th highest volatilities, respectively, while BTC had lower volatility than any of the top 10 most volatile S&P 500 stocks.
Factors impacting prices of listed securities in TradFi are well documented. With crypto, however, still evolving valuation frameworks and primarily speculation-driven investor activity have led to volatility being significantly higher. It is observable, though, that the maturing of the leading cryptocurrencies with the passage of time and their increasing mainstream adoption has meant that their volatility has come down over time. Figure 2 compares the volatility of the most volatile S&P 500 security on an annual basis over the past 10 years vs. the volatility of BTC and ETH over the same period.
Attributes of the most volatile security in the S&P 500 have varied significantly year over year. For example, in 2018, Enphase Energy, Inc. (ENPH), a renewable energy technology company, recorded the highest returns volatility at 81%. The following year, PG&E Corporation (PCG), a utility company, had the highest volatility at 147%. Overall, there is no clear upward or downward trend in the S&P 500 data series of the stock with the highest volatility. In contrast, BTC and ETH volatility has generally decreased over time as they have matured. This trend is especially evident for Ether (ETH). Its volatility dropped from 206% in 2015 to 64% in 2024. In 2015, ETH was more than twice as volatile as the most volatile S&P 500 company. However, by 2024, ETH’s volatility was nearly half that of the most volatile S&P 500 company.
Our summary analysis indicates that while Bitcoin and Ether are often perceived as highly volatile, they compare favorably to some of the most volatile stocks within the S&P 500. In 2024, Super Micro Computer far exceeded the volatility of both cryptocurrencies, while Ether exhibited volatility on par with some high-growth and energy stocks. This comparison underscores the diverse nature of volatility drivers in equities and cryptocurrencies. This is naturally a quick and dirty analysis of crypto vol vs. a select universe of the S&P 500. As a follow-up, it might be worthwhile repeating this analysis over different S&P 500 cohorts to benchmark crypto vol across a cross-section of the broader market. Likewise, it would be instructive to review a larger universe of cryptocurrencies, such as the top 25. However, the bottom-line conclusion is unlikely to change. As the novelty factor fades, as the crypto sector matures and evolves, and as investors become more proficient and comfortable with non-traditional valuation frameworks, we can expect to continue seeing crypto volatility in the same ballpark as the more volatile securities in the broader market.
Originally published at https://www.riskprotocol.io.
