Bitcoin The volatility of brands was treated for years as their greatest characteristic and greatest defect. Recently, that rollercoaster has calmed down to something resembling a smooth ride, with volatility collapsing to around 35 from a high of 120 in 2021. While critics see this decline as a sign that the asset is losing its edge, Trace Mayer, a long-time Bitcoin investor and creator of the Mayer Multiple, maintains that they are drawing the completely wrong conclusion.
Mayer suggested that bitcoin’s declining volatility is not a sign of weakness, but rather a direct reflection of its growing economic substance in an interview with CoinDesk.
“Gary Gensler said he was going to ‘tame bitcoin,'” Mayer said, pointing to regulatory efforts to corral the digital asset. “And we’ve seen volatility drop.”
Instead of seeing this “domestication” as a defeat, Mayer sees it as confirmation of the mass institutional adoption of bitcoin. The market has simply become too big to move as erratically as it did before. “The burden is getting heavier,” Mayer said, using a vivid analogy for market liquidity. “It’s no longer a 50-pound weight. It’s a 2,500-pound weight.”
According to Mayer, this strong structural change is being driven by the sophisticated mechanics of the options market, specifically call selling. As institutions and digital asset firms increasingly sell covered calls against their bitcoin holdings to generate initial premium income, they inadvertently create a dampening effect on price swings.
Because these entities essentially agree to sell their bitcoins at a predetermined price in the future, market makers on the other side of those trades are forced to actively hedge their positions. When the price of bitcoin rises, these market makers sell the asset to balance their risk, effectively creating a natural structural ceiling to price spikes. The result is a more mature and predictable asset, one that is growing right before the eyes of the market.
“When you can come in and sell call volatility in the market, market makers are going to have to do a negative delta,” Mayer said. “That negative call wall is like adding weight to the bar. The price doesn’t necessarily go up, but the total economic substance of that asset has gone up.”
The Mayer Multiple
Mayer created the Mayer Multiple index eight years ago that divides the current price of bitcoin by its 200-day moving average, a long-term trend line that smooths out short-term noise. A reading above 1 means bitcoin is trading above its long-term average, below 1 means it is trading below it. Historically, readings above 2.4 have coincided with market highs, while readings below 0.8 have signaled attractive entry points.
Currently, Bitcoin is just below its long-term trend at 0.94. Mayer notes that, crucially, the standard deviation bands (the statistical range within which the price typically moves) have compressed significantly as more trading history is accumulated.
Looking back five years, one standard deviation above the mean is around 1.3, two standard deviations at 1.6, and three at 2.13. Compare that to previous periods based on data dating back to 2011, where the price regularly reached much more extreme multiples.
In other words, the instrument is maturing in the same way as any asset, as it attracts deeper and more disciplined capital.
Mayer began selling physically settled bitcoin puts and calls as early as 2017 on LedgerX, one of the first federally regulated crypto derivatives exchanges.
Today, that market has expanded dramatically from leveraged ETFs like BITX, to Strategy stock (MSTR), to bitcoins showing up on corporate balance sheets like SpaceX’s reported holding of 18,712 BTC.
Mayer argues that lower volatility is positive for bitcoin because it reflects the asset moving from a speculative instrument to something that investment committees, family offices and corporations can actually subscribe to. “To get that acceptance, you need to have something that’s really boring, like gold,” he said. “Gold is very boring… and that’s what we need.”
He pointed to attending conferences as a tangible sign of that maturation. His blog was published in 2008, before Bitcoin existed, and he regularly presented at major gold conferences that attracted 2,000 to 3,000 attendees. “We had tens of thousands of people at conferences this year and many more last year. It’s a real industry. It’s a real reserve asset.”
Mayer acknowledges the risks to bitcoin, such as weakening network security should the price of BTC not appreciate enough to keep enough miners in business. Quantum technology is another potential long-term threat, should quantum computers become powerful enough to crack Bitcoin’s cryptographic keys. Mayer acknowledged the concern, but noted that Bitcoin’s permanent reward for finding a catastrophic exploit has so far gone unclaimed, and pointed to backward compatibility with proof of work as a structural resilience.
Despite the risks, Mayer remains firmly in the bitcoin over gold camp for the next 15 years. “With gold, higher prices bring more supply. That’s not the case with Bitcoin and we don’t know what technologies could pose a threat to gold’s dominance. We could have asteroid mining or artificial intelligence robots roaming the oceans. But we know Bitcoin is going to hit 21 million.”
