Why Crypto Assets Swing So Much and What That Means for Payments

Why volatility is the first question for crypto payments

Anyone considering accepting payments in Bitcoin or other crypto assets usually hears two arguments: the technology is fast and borderless, and the price could double. For a business, the second argument is not an advantage but a risk. An invoice for 10,000 euros is a fixed number. An amount in crypto assets is not.

This article therefore asks: Why do crypto assets swing so much, and what does that mean for a business that accepts or makes payments in crypto assets? To answer it, we first clarify the terms and the order of magnitude, then present Keynes's beauty contest as a thinking model, go through the main drivers, weigh two readings, and finally derive a rule for payments.

What volatility means and how large it is for crypto assets

Volatility measures how strongly the price of an asset fluctuates around its average. The usual measure is the standard deviation of returns: with a daily standard deviation of 5 percent, the daily move lies within plus or minus 5 percent on roughly two out of three days, and beyond it on the others. A second measure is the drawdown, that is, how much an asset has lost from its previous peak.

In one of the first comprehensive studies of crypto assets, Liu and Tsyvinski (2021) constructed a market index of 1,707 crypto assets with a market value of more than one million dollars, for the years 2011 to 2018. According to their analysis, the mean and standard deviation of returns were an order of magnitude higher than those of stocks in the same period.

The values come from an early, especially turbulent phase and include many small crypto assets. Bitcoin alone fluctuates less today. Still, the order of magnitude remains different from currencies: after its peak in November 2021, Bitcoin lost around 77 percent by November 2022, according to market data. The article Bitcoin on the balance sheet notes that its price history has seen several declines of more than half.

The thinking model: Keynes's beauty contest

In 1936, the economist John Maynard Keynes described the stock market with an image from newspapers of his time. Readers were to pick the six prettiest faces from a hundred photographs. Only those who made the choice that the average of all readers would make could win. A clever player therefore did not pick the faces they found pretty, but those they believed others would pick, and strictly speaking those that others believed others would pick.

For stocks and bonds, there is an anchor alongside this game: earnings, dividends, interest. If the price moves far from it, buyers or sellers pull it back. Bitcoin lacks such an anchor. Its value depends almost entirely on what others will be willing to pay in the future. Consistent with this, Liu and Tsyvinski (2021) find that valuation ratios do not predict future returns, while attention and momentum do. At the same time, returns were barely related to stocks, currencies, commodities, or gold. They found little support in market data for the popular narrative of digital gold.

A simple mechanism follows. If the price depends on expectations about expectations, a piece of news, a crash, or a rumor can shift everyone's expectations at once without anything changing about the crypto asset itself. There is no number for buyers to hold on to.

Where there is no anchor, the price moves as far as sentiment carries it.

The main drivers of the swings

The missing anchor explains why swings are possible. Several drivers explain why they become so large.

Leverage deserves a closer look, because it not only amplifies movements but accelerates them. On October 10 and 11, 2025, after a tariff announcement by the US government, Bitcoin fell at times by more than 14 percent from the previous day's high. According to CoinGlass data, leveraged positions worth more than 19 billion dollars were liquidated within 24 hours, mostly bets on rising prices. The asset manager CoinShares considers the actual total higher, because not all trading venues report fully. How a crypto exchange failed because of missing controls is described in FTX.

Two readings: teething trouble or inherent feature?

Whether the swings will disappear over time is disputed. Both views have arguments.

Agrawal, Mani, and Varshney (2023), also cited in the article on crypto payments in business, classify Bitcoin as a speculative investment rather than a substitute for cash because of its fluctuations. I consider volatility an inherent feature of Bitcoin that can become smaller but will not disappear as long as an anchor is missing. For a business, however, the question is secondary. Whether an asset fluctuates by 50 or 80 percent on an annual basis is equally dangerous for an invoice with a 15 percent margin.

An exception is stablecoins, whose value is pegged to a currency such as the euro or dollar. Their risk is not the price but the issuer's promise, as Stablecoins and MiCA describes. That trust in money cannot be decreed is shown by El Salvador and Bitcoin.

What volatility means for a single payment

For payments, one quantity is decisive that is often missing from the discussion: the time between the moment the amount in crypto is fixed and the moment it has been converted into euros. During this time, the business bears the price risk. The longer the window, the larger the possible deviation.

The article Crypto as a means of payment calculates the same problem from the margin side: with a 10,000 euro invoice and a 15 percent margin, a 15 percent price drop turns the order into a zero-profit deal. Putting both calculations side by side shows that even one week of waiting in the crypto market can wipe out a typical margin. Exporters know the same principle with foreign currencies, only on a smaller scale, as Currency risks in exporting shows.

The time window rule for crypto payments

From the thinking model and the calculation, I derive a rule that I call the time window rule. It applies to businesses that, after the four-question filter in Crypto as a means of payment, are considering a test at all.

1. Set the price in euros

   Issue every invoice in euros. The amount in crypto is calculated at the current rate only at the moment of payment.

2. Lock in the rate with the provider

   Use a licensed payment provider that guarantees the rate for the duration of the payment process and converts into euros immediately.

3. No holding without a resolution

   Decide in writing that incoming crypto assets are converted immediately. Anyone who wants to hold them is making an investment decision, to be resolved separately, for example with the five-point resolution for Bitcoin on the balance sheet.

4. Set limits

   Cap the amount per payment and per month while experience is lacking. That keeps a mistake manageable.

5. Measure deviations

   For every payment, record the invoice amount and the euro amount actually credited. The difference shows whether the time window really is small.

Conclusion: volatility is not a defect but part of the product

To the guiding question: crypto assets swing strongly because they lack an anchor such as earnings or interest, and their price depends on expectations about other people's expectations. Attention, momentum, leverage, and a fixed supply amplify these movements, and individual events shift everyone's expectations at once. Research measures fluctuations an order of magnitude above those of stocks. Whether they will become smaller over time is open.

For payments, a clear rule follows: a business should not assess price risk but avoid it. Whoever invoices in euros, locks in the rate with the provider, and converts immediately is running payment operations. Whoever holds is speculating with business assets, and that is a different decision.

• Check whether there is real demand for crypto payments before discussing volatility.
• For a potential provider, clarify how long the rate is guaranteed and when euros are paid out.
• Decide in writing that incoming crypto assets are converted immediately.
• For every test payment, compare the invoice amount and the euro credit.