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I’ve been wondering about volatility of Bitcoin lately. In particular, I've been curious about the frequency of Bitcoin dips. I parsed through historical daily closing price data and mapped out the frequency of various sized dips ranging from 2013 through 2017.
For dips of 5% or more, there were, on average, 13 days between each dip. Up until 2017, the time between these dips increased (which shows Bitcoin’s decreasing volatility).
For dips of 7.5% or more, there were, on average, 27 days between each dip.
For dips of 10% or more, there were, on average, 47 days between each dip.
For dips of 12.5% or more, there were, on average, 79 days between each dip.
For dips of 15% or more, there were, on average, 97 days between each dip.
The days between dips greater than 5% and 7.5% steadily increased from 2013 to 2016, but decreased in 2017.
However. The days between dips of greater than 10%, 12.5% and 15% generally increased (other than 2016 for 10% and 12.5%) in the years studied.
Takeaways & Trends
Larger dips are becoming less common, while smaller dips may be increasingly common (hard to say given the increase was only in most recent year, 2017).
It would be interesting to test out a trading strategy based on Bitcoin dipping 5% or more occur on average every 13 days. I would consider setting a calendar alarm to go off in 11 or so days that you reset every time there is a dip of 5% or more.
In parsing the historical prices, I broke down the months in which different sized dips occur. Stay tuned for a post on this annual distribution.
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