cryptos volatility
July, 2018

Cryptocurrency Volatility

Volatility is a measure of how much the value of a Crypto currency fluctuates over a specific time period. Volatility is an important parameter to analyze the risk associated with any crypto market, more the volatility of currency, more is the risk associated with that crypto currency as the price is more spread across the range. This means that the price can go either way and can change drastically in a short period of time. Therefore it is a very important factor to consider volatility of crypto currencies before trading/investing in them.

A currency with lower volatility is much more stable. Crypto currencies with low volatility or high liquidity are used as base currencies to enter the crypto market. For example, Bitcoin, Ethereum and, Bitcoin cash are among the least volatile currencies. Though the low volatility is not the only factor but is one of the most important factors to consider a crypto as a base currency.

crypocurrency volatility

Crypto market as a whole is highly volatile, one day you see sharp 30% rise in price of a crypto currency and other day it can go down by 50%, even the base crypto currency Bitcoin is highly volatile, so you must know how to handle variance of the price. Stay tuned with us to know various factors that make crypto currencies so volatile and how to monitor this market.

most volatile cryptocurrencies

Why is crypto currency market so volatile?

  1. Cryptocurrency market still not been regulated by governments around the world. Which in turn can create manipulation in the prices and increase the volatility of the market.
  2. No fallback price - Stock market shares have a fall back value, reaching which it will return back to high value. But the value of a crypto currency cannot be evaluated so the traders never know if they are paying high or less for what they are purchasing, this makes market highly volatile.
  3. No significant source of utility value - There is no basis by which value of crypto currency is evaluated; there are no underlying resources available for that.
  4. Crypto market is still very small as compared to the Fiat market due to the lack of institutional investments. With the rise in market capitalization, market will get stable and volatility will surely decrease.

How to monitor such highly Volatile market?

Cryptoz.ai is a platform showing volatility of 900+ crypto currencies and well as crypto currency indexes. We calculate deviation of the value of crypto currency with respect to the moving average of last month.

How we measure the volatility?

Volatility is measured by calculating percentage standard deviation of the current value with respect to moving average of last 30 days value. To calculate volatility for any given day, following algorithm has been used:

Last 30 days moving average value is calculated taking every day's closing value for a particular crypto currency.

Standard deviation % of today's closing value is calculated against last 30 days moving average to get the day's Volatility. To calculate the standard deviation, standard statistical formulae is used as follows:

  1. Calculate arithmetic mean of today's closing value and 30 day's moving average for that crypto.
  2. Deviation of today's closing value and 30 day's moving average is taken against the arithmetic mean using: ((Number - Mean)/Mean)*100
  3. Results from step b are squared.
  4. The mean of squared results from step c is calculated.
  5. The Square root of the calculated mean from step d gives us the day's Volatility.

crypocurrency index volatility

Tags: