To buy or not to buy at the all time high? The cryptocurrency world is full of mania, hype and volatility. The latest greatest token gets pumped until dumped. And for the past few years, fortune favors the brave who continue to HODL for the long term.
But just how volatile? We can look at the measure of 30 day historic volatility using an chart study called HV(30) which is currently showing an annualized volatility of 333% on XRP at this time. To better understand how volatile this is, we can compare the S&P 500 volatility which has been measured at record lows of under 10% annualized. To better comprehend an asset this volatile, we can also look at the volatility on a shorter time frame to estimate a typical price range for the next 24 hour period.
Using a formula of :
333% / sqrt(365) = 17.43 we can assume the normal price range of XRP (68% of the time) will be +/-17% over the next 24 hours.
If you're thinking this seems like a very wide range, that's the key point here! The measured price moves are extremely volatile and (in contrast to the bullish speculators pumping up the price of XRP to the next all time high) quite reasonable to expect the price to suddenly drop by 17% overnight (or even 34% when a two standard deviation move happens).
It's essential that speculators understand the risks associated with throwing their cold hard cash into the crypto currency game. Sadly, all too often the euphoric crowd can silence any real serious discussion of uncertainty and risks.. just at the time when it is needed the most.
But just how volatile? We can look at the measure of 30 day historic volatility using an chart study called HV(30) which is currently showing an annualized volatility of 333% on XRP at this time. To better understand how volatile this is, we can compare the S&P 500 volatility which has been measured at record lows of under 10% annualized. To better comprehend an asset this volatile, we can also look at the volatility on a shorter time frame to estimate a typical price range for the next 24 hour period.
Using a formula of :
333% / sqrt(365) = 17.43 we can assume the normal price range of XRP (68% of the time) will be +/-17% over the next 24 hours.
If you're thinking this seems like a very wide range, that's the key point here! The measured price moves are extremely volatile and (in contrast to the bullish speculators pumping up the price of XRP to the next all time high) quite reasonable to expect the price to suddenly drop by 17% overnight (or even 34% when a two standard deviation move happens).
It's essential that speculators understand the risks associated with throwing their cold hard cash into the crypto currency game. Sadly, all too often the euphoric crowd can silence any real serious discussion of uncertainty and risks.. just at the time when it is needed the most.