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Most and least volatile cryptocurrencies (2019)

Volatile cryptocurrencies

We’re all familiar that the crypto assets market is very volatile. But this shouldn’t come as a surprise because it’s still an emerging market, despite its over $250 billion market capitalization as of September 2019. In part, it’s this volatility that has helped the crypto space attract millions of retail investors, although, in the long run, it hurts the chances of crypto gaining acceptance as “money”. 

On that note, let’s look at the least and most volatile crypto assets of 2019. For this study, we’ll take into consideration the top crypto assets by 24-hour trading volume and calculate the volatility of these assets on an annualized basis, without including the crypto assets that were issued this year. 

Although there are several methods to calculate volatility, typically analysts prefer historical volatility. Because it’s a good measure of past performance and helps create investment strategies with long-term risk in mind. 

To calculate volatility, we’ll take into consideration the daily returns of the crypto assets from the beginning of the year till September. The volatility of an asset is very closely linked to its deviation over a period, hence we’ll calculate the standard deviation and then annualize it.

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Unsurprisingly, the least volatile crypto assets are stablecoins with Paxos, TrueUSD, USD Coin, and Tether exhibiting the least standard deviation in that order. By design, they’re meant to minimize volatility as stablecoins are crypto-assets whose value is pegged to another asset like fiat currency or gold in some cases. But even they’re not immune to volatility to know more as we've demonstrated in our Blockchain and Crypto report: July 2019.

But what’s surprising is how Bitcoin shows the least standard deviation among the ‘regular’ cryptocurrencies and by regular I mean the ones that aren’t designed to minimize volatility. Since we’re taking into consideration the standard deviation of the daily returns of crypto assets over a fixed period, it varies by a small fraction for all the major cryptocurrencies. Even though the price of these cryptocurrencies has fluctuated significantly this year. 

For example, let’s take Bitcoin. Within the same time frame of our study, the price of this crypto asset has more than doubled and is currently trading ~$10300. On some days, the price would fluctuate by as much as $600 in just a few hours. But as our study shows, in the long run, the daily return of BItcoin shows the least deviation among the major cryptocurrencies.

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