Definition
Volatility is a measure of how much and how quickly the price of a cryptocurrency changes over a given period. High volatility means the price experiences large and frequent swings, while low volatility means the price stays relatively steady. In crypto trading, volatility is a core concept used to describe the overall risk and unpredictability of an asset’s price.
Volatility is often expressed using statistical measures, such as the standard deviation of returns, but it can also be observed informally by looking at how wide daily price ranges are. It influences how traders think about potential gains and losses, and it shapes expectations during both rising and falling market conditions. In environments with wide price gaps or rapid moves, volatility can interact with concepts like slippage and spread.
Context and Usage
In trading, volatility helps describe the character of a market, whether it is calm and stable or fast-moving and turbulent. Periods often labeled as a bull market or bear market can both feature high or low volatility, depending on how sharply prices move within those broader trends. Volatility does not indicate direction by itself; it only reflects the intensity of price changes.
Volatility can affect how closely trade execution prices match expected prices, which relates to slippage and the spread between bid and ask prices. In derivatives markets, expectations of future volatility can be reflected in pricing and in mechanisms such as the funding rate. Overall, volatility is a foundational concept for understanding how dynamic and uncertain crypto markets can be.