Volatility in Crypto , A Complete Guide For Beginners

Volatility is the most important factor in any market no matter if its crypto or stocks. To move further let me give you a little introduction of the Volatility. Volatility is the measure of the price of any assets in a way that how much it has moved up or down over a period of time. If an asset is more volatile ,it means that it is an investment with greater risks. And it can give much higher or much lower return on investment as compared to an asset which is less volatile.

If we talk about crypto then its the new asset class which is considered highly volatile as crypto assets may move upward or downward in a very short period of time. This makes crypto more volatile. It means that it contains higher risks for investment.

Now the question may arise in your mind that how volatility of an asset is measured.? To measure the volatility of an asset one has to see price history of the asset in the last 30 days. The prediction of the future movement of an asset is known as implied volatility. But keep in mind that nobody can predict the future so it is less known factor.

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Bitcoin is generating more volume than any other asset and institutional participation is helping to reduce its volatility. So we can say that its a less volatile asset as compared to a Defi asset which has lower volume so it will have a higher volatility. When you want to invest in such assets make sure you invest only what you can afford to lose.

The next question that may come into your mind is how the volatility of an asset is impacted.? Well the volatility depends on many factors such as bad or good news related to the assets, Higher or lower volumes generated, return on investment , these are number of factors which may increase or decrease volatility.

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For investors that are less risk-tolerant, there are various strategies that can help them to lower down the impact of volatility. Best strategy for these investors is Dollar Cost-Averaging. I have already explained in detail about DCA in one of my previous posts.

On the other hand there are investors who believe in a longterm investment that it will turn to profit over a period of time, such investors dont pay attention to the short term volatility. Well now we have crypto assets that are very very less volatile, these are called Stablecoins that are pegged to a reserve asset like US Dollar.

Thats it for today.
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About Author
@coolguy222 is a crypto trader and content creator on hive blockchain. He also runs a small business of Mobile accessories and Wrist watches. He loves to make new friends. He Spends most of the time on Threads.

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