What are the factors that can cause a high standard deviation in the returns of a specific cryptocurrency?

3 answers

• Feb 17, 2022 · 3 years ago
  One of the main factors that can cause a high standard deviation in the returns of a specific cryptocurrency is market volatility. Cryptocurrency markets are known for their high volatility, which can lead to large price swings and consequently, high standard deviation in returns. Factors such as news events, regulatory changes, and market sentiment can all contribute to increased volatility and higher standard deviation in returns.
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• Feb 17, 2022 · 3 years ago
  Another factor that can contribute to a high standard deviation in the returns of a specific cryptocurrency is liquidity. Cryptocurrencies with lower liquidity tend to have higher price volatility, as even small buy or sell orders can have a significant impact on the price. This can result in larger deviations in returns compared to more liquid cryptocurrencies.
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• Feb 17, 2022 · 3 years ago
  In addition to market volatility and liquidity, the specific characteristics of a cryptocurrency can also influence its standard deviation of returns. Factors such as the size of the circulating supply, the level of adoption, and the technology behind the cryptocurrency can all play a role. For example, a cryptocurrency with a small circulating supply and limited adoption may be more susceptible to price manipulation and speculative trading, leading to higher standard deviation in returns.
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