Volatility

Volatility measures how much and how quickly a price moves. It is commonly calculated as the standard deviation of returns over a period and then annualised. An asset that swings 5% a day is far more volatile than one that moves 0.5%.

Crypto is among the most volatile asset classes. Bitcoin has repeatedly fallen more than 70% from peak to trough in bear markets, and smaller coins can move far more than that. High volatility cuts both ways: it creates the possibility of large gains and of fast, deep losses.

Ways to manage it include sizing positions so a large drop would not damage your finances, avoiding leverage, buying gradually through dollar-cost averaging and keeping a long time horizon. Stablecoins are designed to have very low volatility against the currency they track.