[Digital Today intern reporter Seung-ah Yoo] An analysis says Bitcoin has reduced volatility over the past 10 years and has moved onto a track toward becoming “digital gold.”

On Oct. 8 (local time), blockchain media outlet Coinpost reported that Matt Hougan (매트 호건), chief investment officer at U.S. crypto asset manager Bitwise, wrote in a Wall Street Journal advertorial project titled “Reframing Bitcoin” that Bitcoin is showing a trend of growing into a store of value similar to gold.

Hougan directly addressed a key criticism of Bitcoin: high price volatility. He noted that Bitcoin traded between $126,000 and $58,000 over the past year, but argued it is not appropriate to compare it simply with gold. He said gold has a history spanning thousands of years, while Bitcoin is only 17 years old. He also cited a large gap in market capitalisation, with gold at $28 trillion, or about 37,450 trillion won, and Bitcoin at about $1.7 trillion, or about 2,300 trillion won.

Hougan said the focus should be on the direction Bitcoin is heading, rather than the current state of the two assets. “The important thing is whether Bitcoin is on a trajectory to become like gold,” he said. He said a digital store of value typically begins small and volatile, then rises in price and becomes more stable as it grows, with a broader investor base.

Figures presented by Hougan also show that trend. Bitcoin’s annualised volatility fell to 66% over the past 10 years, 52% over the past five years, 47% over the past three years and 44% over the past year. He said the price rose from under $1 to around $85,000 as of early October in less than 20 years, while volatility moved in a moderating direction.

Institutional inflows were also cited as a driver of changes in market structure. An assessment said Bitcoin prices have tended to stabilise more than in the past as institutional participation increased after the launch of U.S. spot Bitcoin ETFs. JPMorgan earlier said in a March report that about 2.7% of assets flowed out of GLD, the largest spot gold ETF, after Feb. 27 when tensions between the United States and Iran escalated, while BlackRock’s spot Bitcoin ETF, IBIT, saw net inflows of about 1.5%.

Still, Hougan drew a line on whether Bitcoin will ultimately secure a status comparable to gold, saying the market has not yet reached a final judgement. He recommended that, at this stage, investors should hold Bitcoin only within a range they can tolerate regardless of which outcome occurs. He added that even a smaller-than-expected allocation could be meaningful.

Hougan said that after 2015, a portfolio holding stocks and bonds in a 60-40 split had annualised volatility of about 9.8%. He said that if 1% of that had been shifted to Bitcoin and rebalanced quarterly, volatility would have been about 10%, with little difference, while annual returns would have been nearly 1 percentage point higher. He added that it is not known whether those past results will continue in the future.

Whether Bitcoin will fully replace gold remains unknown. Still, Hougan said Bitcoin’s volatility is declining over the long term, and that a trend is emerging that shows the possibility of Bitcoin establishing itself as a store of value like gold as institutional participation expands.

From my piece today in The Wall Street Journal, titled "Bitcoin Is Right on Schedule."