What is the best method to determine the annual volatility of a digital currency?

3 answers

• Dec 28, 2021 · 3 years ago
  One of the best methods to determine the annual volatility of a digital currency is by calculating the standard deviation of its daily price returns over the course of a year. This statistical measure provides an indication of how much the price of the cryptocurrency deviates from its average value. By analyzing the historical price data, you can calculate the standard deviation and use it as a measure of volatility. Remember to use a sufficient sample size to ensure accurate results.
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• Dec 28, 2021 · 3 years ago
  Another method to determine the annual volatility of a digital currency is by using the beta coefficient. Beta measures the sensitivity of the cryptocurrency's price movements compared to a benchmark, such as a market index. A beta greater than 1 indicates higher volatility, while a beta less than 1 suggests lower volatility. By calculating the beta coefficient, you can gain insights into the relative volatility of the digital currency compared to the broader market. Keep in mind that beta is not solely based on historical price data but also considers the overall market conditions.
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• Dec 28, 2021 · 3 years ago
  BYDFi, a leading digital currency exchange platform, recommends using a combination of technical analysis indicators to determine the annual volatility of a digital currency. These indicators include Bollinger Bands, Average True Range (ATR), and Relative Strength Index (RSI). Bollinger Bands can help identify periods of high or low volatility, while ATR measures the average price range. RSI indicates the strength of price movements. By analyzing these indicators, traders can gain insights into the volatility of a digital currency and make informed trading decisions.
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