What is the volatility of an asset?
Simply put, the catalyst that causes the price of a particular asset to rise and fall.
The volatility of an asset(cryptocurrency) is one of the best ways to judge how much risk is associated with that asset. It tells us how much variation there is in prices over time for that one particular asset.
How volatility affect an asset(cryptocurrency)?
The key point to consider is the relationship between the variation(price) from period to period. This is measured using a statistical analysis called a moving average. As the name suggests, these are a series of averages taken over a number of periods. The calculation is so that we can do this calculation without calculators. If we know that the price of a cryptocurrency rose by 10% from one period to the next may be from 3 dollars to 6 dollars, we can simply calculate what this move might be if it were to rise or fall by 20%. It is pretty hard to beat this kind of analysis. At least in our own personal experience, we tend to react very differently to positive and negative variations.
What are some examples?
A high volatility asset is an asset that has high volatility. If it fluctuates by a large amount from one period to the next, this is the sort of thing that will have an impact on its price. For example, if the price of a cryptocurrency rose by 10% from one period to the next, but then fell back to its starting point in the next period slightly lower than it was at the start of the second period, we would say that this stock had high volatility.
Examples of high volatility assets are cryptocurrencies and stocks
It would be unusual for volatile assets to display a stable price, as they are generally associated with a higher level of risk than stable assets. This means that they may be more appropriate for short-term investments, but not long-term ones, as their values are likely to fluctuate significantly over time and without warning.
How volatility affects cryptocurrencies??
Volatility catalyzes the prices of tokens to rise and fall.
The volatility of cryptocurrencies can be a great way to show their relative levels of risk. For example, Bitcoin has a very low level of volatility, as prices have been very stable since the first block was mined in 2009 compared to other alternative coins. Meanwhile, Bitcoin Cash has a much higher volatility than this. This is because it has less liquidity than bitcoin. Because bitcoin is more stable than other alternative coins and does influence the rest of the cryptocurrency market if by market doings bitcoin drop in price say 3% it possible for bitcoin cash, dogecoin, and the likes to fall 10% or more because of volatility.
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