Bitcoins brand volatility was treated for years as both its greatest asset and its greatest flaw. Recently, the slide has settled down to something resembling a smooth ride, with volatility falling to around 35 from a high of 120 in 2021. While critics see this dampening as a sign that the asset is losing its edge, longtime bitcoin investor and Mayer Multiple creator Trace Mayer claims they’re jumping to the 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 wanted to ‘tame bitcoin,'” Mayer said, pointing to regulatory efforts to contain the digital asset. “And we’ve seen volatility drop.”
Rather than seeing this “taming” as a defeat, Mayer sees it as confirmation of bitcoin’s massive institutional adoption. The market has simply become too large to move as erratically as it once did. “The barbell is getting heavier,” Mayer noted, using a vivid analogy for market liquidity. “It’s not a 50-pound weight anymore. It’s a 2,500-pound weight.”
This heavy structural shift is driven by the sophisticated mechanics of the options market, specifically call selling, according to Mayer. As institutions and digital asset companies increasingly sell covered calls against their bitcoin holdings to generate premium income upfront, they are inadvertently creating a dampening effect on price volatility.
Because these entities essentially agree to sell their bitcoin at a predetermined price in the future, market makers on the other side of these trades are forced to actively hedge their positions. When the price of bitcoin ticks upwards, these market makers sell the asset to balance their risk, effectively creating a natural, structural cap on price increases. The result is a more mature, predictable asset – one that grows up right in front of the market’s eyes.
“When you’re able to come in and sell call volatility in the market, market makers are going to have to do negative delta,” Mayer said. “The negative call wall is like putting weight on the barbell. The price doesn’t necessarily go up, but the overall economic substance of that asset has gone up.”
Mayer Multiple
Mayer created the Mayer Multiple ratio eight years ago, which divides bitcoin’s current price 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 tops, while readings below 0.8 have signaled attractive entry points.
Bitcoin is currently just below its long-term trend of 0.94. Mayer notes that the standard deviation, crucial to the statistical range within which price typically moves, has been compressed significantly as more trading history accumulates.
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, drawing on data going back to 2011, when the price regularly reached far more extreme multiples.
In other words, the instrument matures in the same way as any asset as it attracts deeper, more disciplined capital.
Mayer began selling physically settled bitcoin call and put options as far back 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’s (MSTR) equity, to bitcoin appearing on corporate balance sheets like SpaceX’s reported 18,712 BTC holdings.
Mayer argues that lower volatility is positive for bitcoin because it reflects the asset upgrading from a speculative instrument to something that investment committees, family offices and companies can actually subscribe to. “To get that buy-in, you have to have something that’s really boring, like gold,” he said. “Gold is so boring – and that’s what we need.”
He pointed to attendance at conferences as a tangible signal of that maturation. His blog ran in 2008 before Bitcoin existed, and he regularly presented at large gold conferences that drew 2,000-3,000 attendees. “We had tens of thousands at conferences this year and a lot more last year. It’s a real industry. It’s a real reserve asset.”
Mayer acknowledges risks to bitcoin, such as the weakening of network security, if BTC’s price doesn’t appreciate enough to keep enough miners in business. Quantum is another potential long-term threat if quantum computers become powerful enough to crack Bitcoin’s cryptographic keys. Mayer acknowledged the concern, but noted that Bitcoin’s standing bounty for finding a catastrophic exploit has so far gone unclaimed, and pointed to the backwards compatibility of 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 mean more supply. That’s not the case with Bitcoin, and we don’t know what technologies might pose a threat to gold’s dominance. We could have asteroid mining. AI robots searching the oceans. But we know Bitcoin will be 21 million.”
