The price of Bitcoin is so volatile it makes one wonder how the value of this popular crypto-currency would have been reported before the digital age.

News outlets relying only on paper and ink to summarize financial news simply wouldn’t stand a chance of capturing the true value of this alternative currency - which often changes dramatically in the time it takes for ink to dry!

A digital coin for a digital era, it surely is.

While the Cleveland Indian's incredible winning streak has captured the attention of baseball fans across the country this summer, the roller-coaster ride in Bitcoin and other alternative currencies has to be the equivalent in the financial sector.

If you can believe it, Bitcoin started 2017 trading just under $1,000/coin. By September 1st of this year, it had risen to almost $5,000/coin.

Certainly, those that took the early plunge in Bitcoin have been handsomely rewarded. Investors that used $100 to buy Bitcoin in 2010 are multi-millionaires today.

The astronomical value of Bitcoin, and the often dramatic daily movements (both up and down), hasn’t escaped the attention of political leaders around the world, either.

As one might expect, the drama within the price movements of Bitcoin have at times been tied to important regulatory developments affecting the worldwide crypto-currency market.

Most of the world's government bureaucracies are notoriously slow when it comes to understanding and responding to the myriad of headwinds presented by technological advances.

In that regard, crypto-currencies represent a somewhat unique challenge. The concept of a non-sovereign currency is hard enough for most people to understand and value, without considering the fact that the technology underpinning its growth (i.e. blockchain) is at the forefront of innovation.

To say that the collective bureaucratic response to Bitcoin by the world's governments (and governing bodies) has been random and non-congruent to date would be an understatement.

However, recent action by the Chinese government may ultimately foreshadow a more authoritative and unified global approach.

On September 4th, which coincidentally wasn’t long after Bitcoin notched a fresh all-time high, the Chinese government issued some rather strong policy initiatives aimed at Bitcoin and other digital currencies.

Specifically, the Chinese government sought to limit fundraising for new digital currencies, a practice often referred to as Initial Coin Offerings (ICOs).

At that time, the government in China also announced additional measures intended to scrutinize digital currencies and associated transactions. These initiatives included language that forbid banks and financial institutions from doing business with companies involved in ICOs.

As it turns out, the Chinese weren’t finished.

On September 15, news circulated that the Chinese government was mandating the closure of crypto-currency exchanges located within its borders. The newest policy indicated that all alternative currency exchanges had until the end of the day on September 15 to announce an orderly shutdown schedule, while simultaneously blocking any new user registrations.

Although digital currencies are traded throughout the world on various exchanges, the developments in China had an immediate and significant effect on Bitcoin's value. At one point on Friday the 15th of September, Bitcoin plunged below $3,000/coin, which represented a nearly 40% drop from the all-time highs recorded only two weeks prior. The currency has since rebounded.

Given the recent surge in volatility, and the possibility for more announcements by the Chinese government, it’s certain that worldwide digital currency traders are scrambling to ascertain whether we are entering a period of heightened risk, or heightened opportunity, in Bitcoin’s price.

For those people seeking more information on the scale of the Bitcoin market, and how it compares to other segments of the global financial markets, new research published by tastytrade may be of interest.

In an episode titled “How Relevant is the Bitcoin Market?” the tastytrade team examines the notional value of several large trading markets, and compares them to the world’s best-known crypto-currency.

The show also includes an analysis of Bitcoin’s volatility and compares it to a several of the most widely traded sovereign currencies. Teaser: Bitcoin’s volatility is quite a bit higher.

We hope you’ll review the aforementioned episode of Options Jive in its entirety when your schedule allows, and follow up with any comments or questions in the space below (or reach out directly at support@tastytrade.com).

We look forward to hearing from you!


Sage Anderson has an extensive background trading equity derivatives and managing volatility-based portfolios. He has traded hundreds of thousands of contracts across the spectrum of industries in the single-stock universe.