Crypto Volatility
High price instability of cryptocurrencies — causes, measurement and management.
Crypto volatility describes the extreme and rapid price oscillations of cryptocurrencies — BTC can fall or rise 10–20% in one day, altcoins even more.
Causes of high volatility:
•Relatively small market vs global exchanges
•24/7 trading without market makers smoothing oscillations
•High proportion of retail and speculative participants
•News driven — one tweet can move the market
•Whale effect — large holders can manipulate price
•Regulatory shocks — ban in China, SEC lawsuit...
Volatility measures:
•Realized volatility — calculated from historical prices
•Implied volatility (IV) — from options premiums
•VIX analogues: DVOL (Deribit BTC volatility index)
BTC vs tradFi volatility:
•BTC annual volatility: 50–80%
•S&P 500: 15–20%
•Gold: 10–15%
•EUR/USD: 5–10%
How to manage volatility:
•Position sizing — don't put 100% in crypto
•DCA — reduces effect of short-term volatility
•Stablecoin buffer — part in USDC for peace of mind
•Stop-loss — limit maximum loss