A cryptocurrency is a digital or virtual currency that uses cryptography and is difficult to counterfeit. China’s government and central bank announced in 2021 that all cryptocurrency transactions or facilitation were illegal. Rumors about regulations tend to impact Bitcoin’s price in the short term, but the significance of the impacts is still being analyzed and debated. As cryptocurrency is inherently volatile, there’s not much you can do to control it.

A similar dynamic of a rise in the demand for such cryptocurrencies indicates a high level of correlation among the series. Since Bitcoin and other cryptocurrencies are not directly connected to the traditional financial system, they may have escaped some of the problems plaguing other financial assets such as stocks and bonds. Additionally, since the June crypto crash forced many large holders to exit the market, those still holding crypto likely have no inclination to sell anytime soon.

The results also imply that the volatility spillover across cryptocurrency markets was more influential in the second lockdown that started at the beginning of November 2020. Finally, to calculate the financial risk, two methods—namely, value-at-risk and conditional value-at-risk —are used, along with two additional stock indices (the Shanghai Composite Index and S&P 500). Regardless of the confidence level investigated, the selected crypto assets, with the exception of the USDT were found to have substantially greater downside risk than SSE and S&P 500. As the facts of each asset are illustrated in Fig.1, there is a relatively high demand for Bitcoin, Ethereum, and Litecoin, where their prices have an upward swing during the sample period. In this sense, the critical assumption of this study is that an excess demand for such assets can result in a volatility spillover in crypto markets.

The volatility of cryptocurrency

The minimum and maximum values show that the prices of those assets are not stable across different time scales, which refers to the initial question of volatile behavior in cryptocurrency markets. Therefore, this period is characterized as having an extreme increase in the prices of digital assets, thereby indicating the potential for the emergence of volatility spillovers across cryptocurrency markets. Figure4 shows the conditional correlation between the cryptocurrency markets.

The figure depicts the variations in the results of the conditional and unconditional correlations of cryptocurrencies. The lines representing the correlation of pairs cryptocurrency market of USDT with the other markets are mainly at the bottom crossing, with lines equal to zero showing less correlation. In other words, the returns from the USDT market show less correlation with the other selected cryptocurrency markets.

What Is Argentina’s Relationship With Cryptocurrency?

Flexibility in the face of the highly volatile crypto space has pushed for the introduction of new staking mechanics. Head to YouHodler.com today or download the mobile app to see how we help you activate your crypto. After determining your profit target in a percentage, you can also sell your positions in parts. For example, you could sell one-third of a position when the value increases slightly, and hold the rest to wait for a better opportunity.

• In such models, the presence of volatility spillovers in cryptocurrency markets is of crucial importance.
• The best indicator of the future is the past, but for crypto, there isn’t much historical past to look at and give us an idea of how stable things will or won’t be in the future.
• Over 400 million users are protected by Kaspersky technologies and we help 240,000 corporate clients protect what matters most to them.
• Unfortunately, 10 percent of respondents had already experienced losses due to a drop in currency values.

And these investors (called “whales”) control a good deal of the available coins, which means that their actions affect us all. If a whale makes a huge sale, it sparks questions for other investors, potentially causing them to follow suit and spur a decline in the price of bitcoin or other digital currencies. The same logic holds if someone buys huge sums of a specific cryptocurrency. This interactive tool allows the reader to investigate the phenomenon of day-to-day volatility for different cryptocurrencies, traditional assets, and time periods. During the period 2018–2022, Bitcoin’s average daily change (​​measured as the absolute value of the percentage change from the previous day) was 2.87%, versus the Euro (0.34%), pound (0.43%), and yen (0.35%). Other major cryptocurrencies, such as Ethereum (3.76%), Ripple (4.04%), and Dogecoin (4.55%), exceed Bitcoin’s already-high fluctuations.

The results show that the overall relationships of BTC, ETH, and LTC are not limited among themselves but also contain the other markets. However, the scale of that relationship is very decisive among the three even though the cross-correlations from those selected markets are highly significant with the others. In the latter period, while the spillovers remain; they become more pronounced along with high frequency. The second useful investigation http://russiahistory.ru/simeon_bekbulatovich_do_kreshheniya_sain_bulat_sk_8011616_kreshhenyiy_kasimovskiy_han/ was the wavelet coherence, defined as the square of the cross-spectrum, normalized by the individual power spectra. It shows how much the linear information of one asset is explained by the other, and thus, it can be used to estimate causality among the selected assets. Figures6, 7 and 8 depict the wavelet coherence for the highest three cryptocurrencies in terms of their rank of unconditional volatility, given in Table 7.

This makes them censorship-resistant, free from intermediaries, and almost impossible to terminate. When it comes to talking about money, we like to hear words like “secure” or “growth.” “Volatility,” on the other hand, keeps all the most hardened investors up at night. Figure 2 shows volatility relative to that of SPY for BTC, AAPL, GLD, and the Euro over the one-year period from September 2021-August 2022. A value of 1 means that the given asset’s standard deviation was equal to that of SPY. Since December 2021 both GLD and the Euro have had lower volatility than the SPY except for one brief period. We do not give personalized investment advice or other financial advice.

Low trading volumes and macroeconomic uncertainty have quashed volatility in the crypto market—but that might not necessarily be such a bad thing. Kaspersky is a global cybersecurity and digital privacy company founded in 1997. Kaspersky’s deep threat intelligence and security expertise is constantly transforming into innovative security solutions and services to protect businesses, critical infrastructure, governments and consumers around the globe.