*Giulio Malberti and Thom Adcock*

In late 2017, Bitcoin was in the spotlight for its extraordinary return. But how volatile is it?

To consider Bitcoin volatility, we look at 10-day returns (capital standards typically estimate market risk over a 10-day period) since 19 July 2010, when Bloomberg’s Bitcoin data start. We compare Bitcoin with assets in three categories – currency pairs, commodities and equities – and for each we have picked one low-volatility asset and one more volatile asset. For currency pairs and commodities, we chose the most and least volatile ones (in terms of standard deviation of 10-day returns) out of the most liquid in each category. And we chose the most and least volatile FTSE 100 equities (again, in terms of standard deviation of 10-day returns).

For stable assets we expect a peaked distribution with short tails, as returns cluster near 0%. **Figure 1** shows that Bitcoin has been more volatile than any other asset in our sample.

**Figure 1**

But people are often interested in the downside risk of assets. We therefore consider how Bitcoin’s Value at Risk (VaR) compares to other assets. VaR is the maximum loss over a given time interval under normal market conditions at a given confidence interval (eg 99%). A 10-day 99% VaR of -10% tells you that 99% of the time your 10-day return on the asset would be no worse than a 10% loss.

**Figure 2** shows Bitcoin’s VaR is high, but the VaR of the other most liquid crypto-assets is higher. TRON’s VaR to date (-84%) is almost twice Bitcoin’s (-44%).

**Figure 2**

**Giulio Malbe***rti and Thom Adcock work in the Bank’**s Banking Policy Division.*

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