Bitcoin Brand volatility has for years been considered both its greatest characteristic and its greatest flaw. Recently, this roller coaster has calmed down and turned into something resembling a smooth ride, with volatility plummeting to around 35 from a 2021 high of 120. While critics see this slowdown as a sign that the asset is losing its edge, longtime Bitcoin investor and creator of Mayer Multiple, Trace Mayer, says 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, highlighting regulatory efforts to control the digital asset. “And we’ve seen volatility decrease.”
Rather than seeing this “taming” as a defeat, Mayer sees it as confirmation of the massive institutional adoption of Bitcoin. The market has simply become too large to move as erratically as before. “The bar is getting heavier and heavier,” Mayer noted, using a striking analogy with market liquidity. “It’s not a 50-pound weight anymore. It’s a 2,500-pound weight.”
According to Mayer, this profound structural change is driven by the sophisticated mechanics of the options market, particularly options writing. As institutions and digital asset companies increasingly sell covered calls against their bitcoin holdings to generate upfront premium income, they are inadvertently creating a dampening effect on price movements.
Since these entities are essentially agreeing to sell their bitcoins at a predetermined price in the future, the market makers on the other side of these transactions are forced to actively hedge their positions. When the price of Bitcoin rises, these market makers sell the asset to balance their risk, creating a natural and structural ceiling to price spikes. The result is a more mature and predictable asset that grows before the eyes of the market.
“When you are able to enter and sell the volatility of call options in the market, market makers will have to make a negative delta,” Mayer said. “This negative call wall is like adding weight to the bar. The price is not necessarily increasing, but the total economic substance of this asset has increased.”
The Mayer multiple
Mayer created the Mayer Multiple ratio eight years ago that divides the current price of Bitcoin by its 200-day moving average, a long-term trend line that smoothes out short-term noise. A value above 1 means bitcoin is trading above its long-term average, and below 1 means it is trading below it. Historically, values above 2.4 have coincided with market highs, while values below 0.8 have signaled attractive entry points.
Bitcoin currently sits just below its long-term trend at 0.94. Mayer notes that, crucially, the standard deviation bands in the statistical range in which prices typically move have narrowed significantly as trading history accumulates.
Over a five-year period, one standard deviation above the average is around 1.3, two standard deviations at 1.6 and three at 2.13. Compare this to earlier periods using data going back to 2011, where prices regularly reached much more extreme multiples.
In other words, the instrument matures in the same way as any asset, because it attracts larger and more disciplined capital.
Mayer began selling physically settled bitcoin call and put options as early as 2017 on LedgerX, one of the first federally regulated crypto derivatives exchanges.
Today, this market has grown significantly, from leveraged ETFs like BITX, to shares of Strategy (MSTR), to bitcoin appearing on company balance sheets like the 18,712 BTC reported by SpaceX.
Mayer says lower volatility is positive for Bitcoin because it reflects the asset’s shift from a speculative instrument to something that investment committees, family offices and corporations can actually buy into. “To get that buy-in, you kind of have to have something really boring, like gold,” he said. “Gold is so boring – and that’s what we need.”
He highlighted participation in conferences as a tangible sign of this maturation. His blog was running in 2008 before Bitcoin existed, and he regularly presented at large 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 pipeline.”
Mayer acknowledges risks to Bitcoin, such as weakening network security if the price of BTC does not appreciate enough to keep enough miners operating. Quantum poses another potential longer-term threat, if quantum computers become powerful enough to decrypt Bitcoin’s cryptographic keys. Mayer acknowledged this concern, but noted that Bitcoin’s ongoing bounty for discovering a catastrophic exploit has so far gone unclaimed, and highlighted the backward compatibility of proof of work as structural resilience.
Despite the risks, Mayer remains firmly in the Bitcoin camp over gold for the next 15 years. “With gold, higher prices lead to 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. AI robots roaming the oceans. But we do know that Bitcoin is going to be 21 million.”
