$ qubo learn foundations/03

Volatility and drawdowns

Volatility measures how much a price moves around, up or down. Crypto assets are known for high volatility: daily moves of 5% or more happen regularly, while large stock indices often move less than 1% a day.

A drawdown is the fall from a previous peak to a later low, in percent. It describes the worst stretch an investor holding the asset would have lived through, which a simple yearly return hides.

Drawdowns are asymmetric. After a 50% fall, the asset needs a 100% rise to return to its peak. After a 20% fall, it needs a 25% rise. The deeper the drawdown, the steeper the recovery required.

Looking at the size of past drawdowns gives a realistic picture of what holding an asset has involved. Past drawdowns do not predict future ones, but they show the range of moves an asset has already produced.

// rule to remember

// your turn

Open Markets › Cryptos, sort by 24-hour change and compare the largest move with the move of BTC over the same period.

Educational content only. Not investment advice. Past data does not predict future results. Risk disclosure