The value of Bitcoin and other cryptocurrencies has surged in recent years. Bitcoin's price has more than doubled in 2021, and Ethereum's worth has more than quadrupled this year.
There are no indices to assess crypto price volatility, but a glance at historical price charts shows that stratospheric peaks and depressed dips occur at a faster and more dramatic rate in crypto prices than in prices of assets in mainstream markets.
In 2016, the price of bitcoin increased by 125 percent, then it increased again in 2017, this time by more than 2,000 percent. Bitcoin's price has fallen again since its 2017 peak when it reached new all-time highs and continued to record new all-time highs in the early part of 2021, more than double the peak price reached during the 2017 bull run.
There are signs that volatility in cryptocurrency markets is easing. Institutional investors and trading organizations are beginning to embrace the asset class with greater commitment, and a cryptocurrency derivatives market is also taking shape as part of the development and expansion of the broader crypto market ecosystem.
It remains to be seen whether crypto volatility will eventually replicate volatility patterns seen in traditional assets. However, as the asset class grows and develops, it will very certainly continue to exhibit outsized volatility until it reaches full maturity at some point in the future.
Why Is Crypto Volatility Good?
Volatility is an essential factor to grasp because it measures risk. Understanding one's risk tolerance and volatility is always the first step for investors and traders before engaging in any type of investing.
Different people have varying levels of risk tolerance, which influences their investment choices. The cryptocurrency market is a highly volatile market with a double-edged sword; it has the potential to yield large gains, but it also carries a high danger of severe capital loss.
