How to understand crypto volatility?

One of the well known features of crypto is its volatility. Crypto volatility refers to how much and how quickly the price of a certain coin can change over time. High volatility means prices can rise and fall significantly in a short time, while low volatility means prices are more stable.

But why does that happen? Here are the main reasons why.

• Market sentiment: crypto prices tend to react strongly to news, social media trends, and fear. From regulatory updates from governments, to announcements from major companies, to viral trends on social media, all these factors can cause the price of crypto to change rapidly. 

• Global economic events: related to the above points, investors are usually influenced by global economic conditions (such as inflation or interest rate changes). Any major global economic update can create uncertainty, which drives traders to either buy certain coins or sell off, creating price fluctuations.

• Liquidity: when a coin has lower trading volumes, this means it will be a more volatile coin because even a small buy or sell transaction can manage to move the price significantly.

So, how can you measure volatility?

An easy way to measure any coin’s volatility is by examining its price chart over a period of time. On Rain’s Market page, you can look at any coin’s price change over the duration of 24 hours, 1 week, 1 month, and 1 year to get a better idea of its volatility.

While price volatility creates opportunities for profit, it also poses risks for loss. You can always limit your risk by only investing what you can afford to lose, invest in multiple coins to minimize exposure, and stay informed by following news updates that might affect the crypto market.