What Is Volatility? | Cryptocurrency Glossary

An Indicator of Risk Due to Price Fluctuations

Volatility refers to the degree of price fluctuation in currencies, stocks, and other assets. High volatility indicates that the currency or stock experiences significant price swings and carries high risk, whereas low volatility implies minimal price fluctuations and low risk.
Volatility is generally expressed numerically using standard deviation.

In this context, trading risk does not imply fear, anxiety, or danger. Rather, high volatility means that price fluctuations are frequent and significant, making prices prone to sharp swings and difficult to predict. While this offers the potential for substantial profits if predictions are accurate, it also carries the risk of significant losses if they are incorrect. In addition
to foreign exchange and stock trading, trading has recently expanded to include cryptocurrencies like Bitcoin and altcoins such as Ethereum, where profits are generated by exploiting price differentials.

Since these are still relatively new cryptocurrencies, Bitcoin exhibits volatility that is three to five times higher than that of the USD/JPY pair, which is a representative currency pair in the foreign exchange market.
Therefore, compared to USD/JPY trading, Bitcoin trading involves significantly higher volatility and risk, with the potential for sharp surges or crashes. However,
if your predictions and timing are correct, you can aim for substantial profits.