Volatility is a double-edged sword in crypto peace. Crypto volatility has several similarities with the stock market or bond volatility. In essence, they are similar; the only difference is the intensity. For instance, within the crock market, penny stocks that do not trade at the stock markets are often considered the most volatile. However, by comparing the volatility of penny stocks to that of cryptocurrencies, we realize that cryptocurrency volatility is much higher.
When we say crypto volatility is a double-edged sword, we mean that it can be of significant benefits to the investor as much as it can be of significant losses. Cryptocurrencies volatility is widely known to investors due to the frequent price fluctuations in the crypto market.
Essentially, most well-renowned stocks cannot have the kind of price actions witnessed in crypto charts since they are relatively stable. Well-established stocks like Apple and Amazon record minor price fluctuations compared to the fluctuations witnessed with Bitcoin price.
While governments and institutions tend to stabilize Bitcoin, it is still a highly volatile asset compared to traditional financial assets and fiat; however, the case is different for Altcoins such as ETH, Cardano, Solana, and Dogecoin. Alts like ETH experience price surges when NFTs are trending since most NFTs depend on its platform. The meme coins, for instance, experience ridiculous price changes due to Elon Musk’s endorsement tweets.
So what exactly is crypto volatility, and how can we beat cryptocurrency volatility?
What is crypto volatility?
Cryptocurrencies’ volatility is a result of their unstable nature. The volatility of any investment vehicle can be described as its tendency to appreciate or depreciate over a particular period.
Cryptocurrency volatility, therefore, is the rising and falling of a particular cryptocurrency token price over time. Cryptocurrencies that have vigorous price changes within short periods are more volatile than more stable ones.
Let’s bring stablecoins into the picture to make the comparison clearer.
If you hold $100 worth of USDT today, you expect to have $100 worth of stablecoins tomorrow, the day after, and even for several years to come, therefore Stablecoins are generally “stable” since they do not fluctuate in price – meaning they are less volatile.
On the other hand, $100 worth of Cardano (ADA) token today may be worth $70 tomorrow and worth $500 in a few years. The changes in the price of the crypto token make it a volatile cryptocurrency.
The question, however, is why is crypto so volatile today?
Why is cryptocurrency so volatile?
There are several explanations for why cryptocurrency volatility is high today compared to many other forms of financial investments. Crypto volatility is essentially attributed to the development of the industry.
To be fair, the stock market, which is used as a benchmark comparison of market volatility, began several decades before introducing cryptocurrencies. Therefore, the crypto market still experiences a broader array of market sentiments, with prominent and renowned investors like Warren Buffet openly criticizing the value of the market.
Due to such negative news, young investors often succumb to the Fear Uncertainty and Doubt (FUD) caused by such negative broadcasting.
Volatility in cryptocurrency is attributed to several other aspects such as lack of enough knowledge on the field among investors; it is a speculative asset — therefore, most of the investors invest due to its potential to appreciate in value, and it is still a developing technology with new emerging technologies and concepts.
Crypto volatility is at the highest during FUD and FOMO (Fear of Missing Out). There are two instances when the crypto investors are uncertain and make rush decisions. FUD usually leads to a sharp reduction in prices, while FOMO leads to a sharp increase in prices.
Experienced investors usually take advantage of these occurrences and make profits; unfortunately, several crypto investors are not veteran investors; therefore, they lack knowledge of why is cryptocurrency so volatile, what causes volatility in cryptocurrency, how to measure crypto volatility, and how to beat volatility through crypto earnings platforms like CoinRabbit.
How to measure volatility in crypto?
Cryptocurrency volatility can be quantified in several mathematical ways. In standard practices, crypto volatility is often measured based on a previously established average or mean price action within the last 30 days.
Notice that it is difficult to determine the future cryptocurrency volatility of particular crypto assets since most mathematical functions developed are merely speculative and can only provide estimates.
The crypto market is influenced by several factors and variables that make it extremely difficult to construct an accurate mathematical model applicable to all cryptocurrencies. However, future crypto volatility – also described as implied volatility, can be estimated using technical chart analysis using mathematical tools like Cboe Volatility Index, aka the “fear index.”
Implied crypto volatility can also be calculated using the beta method used in the stock market. Although the stock market uses S&P 500 as the benchmark, in the crypto market it is possible to use the entire crypto market behavior as the benchmark of market volatility.
Finally, analysts can also find the cryptocurrency’s standard deviation, an apparent measure of how the digital token volatility deviates from its historical price data.
How to beat volatility in crypto?
Options exist for those crypto investors who desire to make the most out of crypto volatility. The simplest way to beat crypto volatility is to use crypto-earning platforms. Crypto-earning platforms like CoinRabbit give crypto investors a chance to earn interest on their stablecoins by offering a secure and flexible saving platform that does not limit investors.
Notably, Crypto-earning platforms are different from yield farming and staking platforms, requiring investors to lock up their savings for a specific timeframe. Unlike staking and yield farming, crypto earning platforms allow users to earn a lucrative 8% Annual Percentage Yield which is considered a very competitive rate in the crypto space.
As earlier described, cryptocurrency volatility is a double-edged sword, and in any investment, a double-edged sword implies a fifty-fifty risk. Veteran investors would not want to risk their investments on a fifty-fifty chance of losing their investment of making some profit as it signifies poor risk management techniques.
So, what alternatives do risk-averse crypto investors have as a tool to beat cryptocurrencies volatility while also maximizing their profit potential?
How do crypto earnings help you to beat volatility?
Crypto earning is the answer to all these questions. On the CoinRabbit crypto earning page, cryptocurrency holders are allowed to deposit three different stablecoins (USDT TRC-20, USDC, and USDT ERC-20) at the moment to start earning 8% APY on their deposits.
This method allows good risk managers to avoid the turmoils caused by crypto market volatility while still enjoying a lucrative 8% APY on their investment.
Considering holding volatile cryptocurrencies may result in a profit or a loss, in that well the prices go down the value of your investment decreases, and vice versa. Taking advantage of the crypto earning feature is a wise move.
When holding speculative crypto assets like Bitcoin, the price can move from its currency $50,000 mark to $70,000 and drop back to $40,000 after three years of holding. The implication is, as an investor, your investment will have lost $10,000 over three years of holding without factoring in the time value for money.
CoinRabbit’s crypto earning platform offers the perfect hedge from the notorious cryptocurrency volatility experienced today.