Bitcoin’s trademark volatility has long been treated as both its greatest feature and its biggest drawback. Recently, that roller coaster has calmed down to something resembling a smooth ride, with volatility dropping from a 2021 high of 120 to around 35. While critics see this decline as a sign that the asset is losing its edge, Trace Mayer, a longtime Bitcoin investor and creator of the Mayer Multiple, argues that they are drawing completely the wrong conclusion.
In an interview with CoinDesk, Mayer suggested that Bitcoin’s declining volatility is not a sign of weakness, but a direct reflection of its growing economic substance.
“Gary Gensler said he was going to ‘tame Bitcoin,’” Mayer said, pointing to regulatory efforts to corral digital assets. “And we’ve seen volatility go down.”
Rather than seeing this “taming” as a defeat, Mayer sees it as confirmation of large-scale institutional adoption of Bitcoin. The market has become too large to move erratically as it once did. “The barbell is getting heavier and heavier,” Mayer said, using a vivid metaphor for market liquidity. “It doesn’t weigh 50 pounds anymore. It weighs 2,500 pounds.”
Meyer said this major structural change is being driven by the sophisticated mechanics of the options market, particularly call selling. Institutional investors and digital asset companies are increasingly selling covered calls against their Bitcoin holdings in order to earn upfront premium income, inadvertently creating the effect of dampening price volatility.
Because these entities are essentially agreeing to sell Bitcoin at a predetermined price in the future, the market makers on the other side of these transactions need to actively hedge their positions. When the price of Bitcoin rises, these market makers sell their assets to balance their risks, effectively creating a natural, structural cap on price appreciation. The result is a more mature and predictable asset that continues to grow in front of the market.
“If you can sell call volatility into the market, market makers will have to run a negative delta,” Mayer said. “That negative call wall is like adding weight to a barbell. The price hasn’t necessarily gone up, but the overall economic substance of that asset has increased.”
mayer multiple
Eight years ago, Mayer created the Mayer Multiple ratio, which divides Bitcoin’s current price by its 200-day moving average, a long-term trend line that filters out short-term noise. A number above 1 means Bitcoin is trading above its long-term average, while a number below 1 means it is trading below its long-term average. Historically, readings above 2.4 have matched market highs, while readings below 0.8 have indicated attractive entry points.
Bitcoin is currently slightly below its long-term trend of 0.94. Importantly, Mayer points out that as trading history accumulates, the standard deviation, the statistical range within which prices typically fluctuate, shrinks significantly.
Looking back over a five-year period, one standard deviation above the mean is approximately 1.3, two standard deviations above the mean is 1.6, and three standard deviations above the mean is 2.13. Compare this to an earlier period based on data dating back to 2011, when prices were regularly reaching much more extreme multiples.
In other words, the product is maturing like any other asset and is attracting deeper, more disciplined capital.
Mayer began selling physically settled Bitcoin call and put options in 2017 on LedgerX, one of the first federally regulated crypto derivatives exchanges.
Today, that market has expanded dramatically from leveraged ETFs like BITX to shares of Strategy Inc. (MSTR) to Bitcoin appearing on the balance sheets of companies like SpaceX Inc. (reportedly 18,712) $BTC I’m holding it.
Mayer argues that lower volatility is a positive for Bitcoin. Because it reflects a shift in assets from a speculative vehicle to something that investment committees, family offices, and corporations can actually underwrite. “You have to have something really boring like money to get buy-in,” he says. “Gold is so boring and that’s what we need.”
He cited conference attendance as a visible sign of that maturity. His blog was running in 2008, before Bitcoin existed, and he regularly spoke at major gold conferences that attracted 2,000 to 3,000 attendees. “We had tens of thousands of people at this year’s conference, and even more last year. This is a real industry. A real reserve asset.”
Mayer acknowledged risks to Bitcoin, including weakening network security. $BTCThe price of is not valued high enough to keep enough miners in business. Quantum could also pose a long-term threat if quantum computers become powerful enough to crack Bitcoin’s encryption keys. Mayer acknowledged that concern, but pointed out that Bitcoin’s ongoing bounties for discovering devastating exploits have so far gone unclaimed, and pointed to the backward compatibility of proof-of-work as a structural resilience.
Despite the risks, Mayer remains firmly in favor of Bitcoin over gold for the next 15 years. “In the case of gold, an increase in price increases the supply. That is not the case with Bitcoin. We don’t know what technology will threaten gold’s dominance. We may be able to mine asteroids. AI robots will explore the oceans. But we do know that Bitcoin will reach 21 million.”
