Volatility in cryptocurrencies is similar to volatility in other financial markets, like stocks and commodities. It refers to the degree of variation of a trading price series over time as measured by the standard deviation of returns.
Simply put, volatility is a statistical measure of the dispersion of returns for a given security or market index. In cryptocurrencies, it refers to how much the price of a cryptocurrency can change in a short period.
Cryptocurrencies are known for being highly volatile. The prices can change dramatically in a single day, which can lead to significant profits, but also substantial losses. Bitcoin, for example, has gone through several boom and bust cycles in its relatively short life.
Factors influencing crypto volatility can include changes in market sentiment, regulatory news, technological advancements, market maturity, liquidity, speculative trading, and macroeconomic factors.
It’s important to note that high volatility can make a market exciting, but it can also make it risky. So, people who invest in cryptocurrencies need to be prepared for the possibility that they could lose their entire investment. It’s also wise to only invest money that you can afford to lose, and to do thorough research before making any investment decisions.