Research

Cryptocurrency volatility (part 1): In the wild cryptocurrency markets, Bitcoin is the least stressful

Cryptocurrency markets are notoriously volatile. Over the course of months and years, they can return or decline orders of magnitude in value. Over the course of days, they can double or treble. It’s not a market for the faint-hearted.

In the grand scheme of investment vehicles, Bitcoin is criticized (and praised) for sudden swings in value. But in the (less) grand scheme of cryptocurrencies, it is remarkably stable.

We looked at day-to-day changes in the USD price of 100 cryptocurrencies to see how volatile and stable they have been since 2015. For purposes of this analysis, we defined volatility as a day-to-day change in price. Think about it as representing the relative stress one might experience in checking the price one morning and see it change the next morning. It is not ‘stability’ over a longer time period, which we will cover in a future post.

The two graphs below show the distribution of days in which the price differed from the previous day’s price. Think of this like a daily return (positive or negative). The days are distributed into categories: for every day in which the price changed less than 1%, the bars on the far left get larger. Blue is for days with positive returns, red for days with negative returns. A coin with very low day-to-day volatility would have most days in the first two categories: daily price movements of no more than 3%.

Here is the total across the market of all 100 coins we analyzed.

Currency Volatility

This involved over 40,000 days of price changes. 48% of those were days of positive returns; 52% were days of negative returns. So if you had money evenly distributed across all coins on every day, then for one and a half years, you would have ridden the entire roller coaster depicted above. Over 20% of those days involved between 5 – 10% price swings; a quarter were over 10%. Only approximately 40% of those days involved price swings of less than 3%.

Here is the same data for just Bitcoin: almost 550 days of price days. 55% of those were days of positive returns; 45% were days of negative returns. 75% of those days involved price swings of less than 3%.

Bitcoin Volatility

If you’re someone who is investing in cryptocurrency and check the market every day, Bitcoin can be the coin that *doesn’t* keep you up at night. We ultimately ranked all coins based on their annualized volatility for the days in which they were trading.

The other top 10 least volatile coins were┬áRipple, Namecoin, Stellar, Litecoin, Dash, NuBits, Novacoin, and Peercoin. It’s not that these coins retained their value over time, but rather as they rose and fell, they did so gently.

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