Volatility refers to how rapidly and dramatically an asset’s price varies. It is typically calculated using the annual return on an asset over a predetermined time period as well as by using standard deviations.
Volatility is frequently utilized as an accurate indicator of the investment risk connected to an asset because it measures the speed and magnitude of price movements.
Similar to conventional markets, cryptocurrency markets use volatility as a key indicator of risk. Cryptocurrencies are far more volatile than most other asset classes because of their digital nature, the current lack of regulation, and the smaller market size.
Due to the fact that some investors were able to make significant profits in very short periods of time, this higher level of volatility is what fuels the widespread interest in investing in cryptocurrencies. The long-term market expansion, increased regulation, and increased acceptance of cryptocurrencies are all likely to result in a decrease in market volatility.
