Understanding volatility in cryptocurrencies

Those investing in cryptocurrencies don’t need an extra helping of caffeine to stay awake. The price changes will keep you alert; rising euphorically at times and crashing at others. Many perceive this volatility as a downside, but this price fluctuation can be precisely measured. Those that understand how to do so are able to make better decisions. That said, it’s a fact that Bitcoin and other cryptocurrencies fluctuate much more than most traditional investments. In this article, we explain why this is the case, how volatility has changed and how investors can deal with it.

What volatility actually measures and what it doesn’t

Volatility is a type of measurement. Put simply, it shows how large the fluctuations in the average price are, regardless of whether they are up or down.

In the financial world, this is known as the standard deviation of returns. The greater the deviation of individual price movements from their average, the higher the volatility. Calm markets are said to have low volatility, while turbulent markets have high volatility.

Cryptocurrencies aren’t “volatile” because they are “risky” per se, but because their prices fluctuate more sharply and frequently than, say, the Swiss SMI or the US technology index Nasdaq. It’s precisely these fluctuations that classify cryptocurrencies as higher-risk investments.

What volatility doesn’t measure

Volatility can tell you a lot, but not everything. It won’t tell you:

• If the price will rise or fall in future.
• The reasons for the volatility, which can be numerous (e.g. political decisions, economic developments or global events).
• They do not tell us whether the fluctuations will remain the same in the future.
• Volatility also includes upward fluctuations, i.e. when prices rise. This is how prices should ideally develop.

Understanding volatility values correctly

Volatility figures can appear abstract. However, they can be translated into clear scenarios that make fluctuations easier to understand. An example: at the end of June 2025, Bitcoin’s annualized 30-day volatility stood at 32.72 percent (calculated from daily price movements over the past 30 days and projected over a year). What does this mean specifically? A volatility of around 32 percent means there is a 68 percent probability that the annual return will fluctuate by ±32 percent around the average. This shows how wide the typical fluctuation range is.

Why are cryptocurrencies so volatile?

There are numerous reasons why cryptocurrencies fluctuate more than traditional investments, such as shares or gold. Here are some of them:

Comparison of Bitcoin volatility: gold, SMI and Nasdaq

Cryptocurrencies such as Bitcoin are often compared to gold or stock indices, including when it comes to volatility. However, these investment types differ greatly in their structure.

Share indices such as the Swiss Market Index (SMI) or the Nasdaq consist of many individual securities. This wide range of securities automatically reduces volatility. This is known as diversification. Gold is not an index, but it has been established for centuries. In times of crisis, many investors look for security, helping to stabilize fluctuations.

On the other hand, Bitcoin is an individual asset and still young as an asset class. The technology has been around since 2009 and started being traded in 2010. Precisely because the technology is still young, Bitcoin reacts more sensitively to market sentiment, news or regulatory developments, with correspondingly stronger fluctuations.

Even if the direct comparison is flawed, historical volatility provides a rough indication of typical fluctuation margins.

How the volatility of Bitcoin, etc. has changed

Bitcoin used to be known for extreme price fluctuations. In the first few years, and especially during the hype of 2017, the annualized 30-day volatility sometimes exceeded 150 percent. Even in 2020, values of over 60 percent were still being measured.

Over the past 12 months (as of August 2025), Bitcoin’s annualized 30-day volatility has levelled off in the range of around 30 to 45 percent, with a clear downward trend. As an example, at the end of June 2025, volatility stood at around 32 percent. This is still high compared to gold or traditional stock markets, but much more stable than in the frenzied early years.

Historic volatility of Bitcoin

Bitcoin volatility compared to other cryptos

The second-largest cryptocurrency, Ethereum, is following a similar trend to Bitcoin, albeit at a higher level. Other major cryptocurrencies, such as XRP, Solana and Cardano remain significantly more volatile, however. This is often due to lower liquidity, less institutional participation and a lack of fundamental data. Many of these currencies are also younger and therefore less established. All five cryptocurrencies listed here are in the top ten by market capitalization and can be traded with PostFinance.

Bitcoin volatility compared to shares

The lower volatility of Bitcoin can also be seen in direct market comparisons. An analysis by House of Satoshi showed Bitcoin’s realized 90-day volatility from June 2022 to June 2024 was 40.6 percent on average.

What’s surprising is that Bitcoin was less volatile than some of the Magnificent Seven, namely Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta and Tesla. In several phases over the past few years, Bitcoin has fluctuated less than some of these highly capitalized technology groups. This puts its supposed reputation as a particularly risky asset into perspective, at least from a volatility viewpoint.

Magnificent Seven one-year volatility

This comparison highlights that the biggest price fluctuations on the market are no longer exclusively in crypto. Instead, Bitcoin is on the way to aligning its risk structure with the major growth stocks from the technology sector.

Reasons for Bitcoin’s reduced volatility

The declining volatility of Bitcoin – and in some cases other cryptocurrencies as well – is not without reason. Several market-related structural developments are contributing to this:

• Market maturity: the use of Bitcoin and other cryptocurrencies as a long-term investment instrument has increased. This means short-term speculation has less impact, because strategic investments are increasingly commonplace.
• ETF approvals: products such as exchange-traded funds in Bitcoin or Ethereum increase liquidity and improve the market pricing efficiency.
• Institutional capital: the entry of professional investors with long-term strategies and larger volumes has a dampening effect on extreme price fluctuations.
• Infrastructure and regulation: regulated trading, secure custody and transparent markets reduce risks and anxiety.

Targeted use of trading volatility

For many investors, the focus is on long-term development. But there are also investors who make targeted use of short-term fluctuations. Proactive investors pursue different strategies and focus on market fluctuations in order to make a direct profit. This requires experience, clear rules and a good understanding of volatility.

Day trading strategies are often based around these fluctuations. The key thing is for traders to keep a cool head and apply their rules consistently; stop-loss orders, position sizes, a good understanding of the market and the ability to react quickly are all things traders should keep in mind. Without experience or strategy, high volatility can quickly become a disadvantage.

What should I do in the event of price fluctuations? Five tips for keeping a cool head

How do you deal with the sometimes severe movements on the crypto market without losing your nerve? Many people ask themselves this very question. The answer has less to do with the market and more with their own strategy.

These five principles will help you remain calm, even during volatile periods:

• Know your risk profile: your risk appetite and risk capacity determine your personal risk profile. Your investment strategy is based on this, including asset allocation and product selection.
• Maintain a long-term perspective: fluctuations in cryptocurrencies can offer opportunities for experienced investors, such as in speculative strategies. But for most investors, staying power generally pays off: fluctuations even out over a longer period of time, avoiding rash mistakes. The “buy & hold” strategy is more reliable for many people, especially when it comes to the most important cryptocurrencies.
• Take advantage of diversification: Bitcoin and other cryptocurrencies can be part of your portfolio but should not make up the majority share. Broad diversification across different asset classes reduces risks and stabilizes returns.
• Use automation: regular inpayments via a saving plan and periodic adjustment of your portfolio allocation ensure that your strategy is implemented consistently. This reduces the chance of making emotionally charged decisions and maintains target weighting.
• Don’t overreact: short-term price fluctuations are normal, even for established investments. It’s better to follow your own plan than to be influenced by headlines or market rumours.

What this means for investors

Cryptocurrencies remain volatile, some more so than others. Major cryptos such as Bitcoin and Ethereum are still showing signs of movement today, but don’t have the wild fluctuations they used to.

For well-informed investors, volatility is therefore not a warning sign but a part of the game. If correctly understood, it can even be a strategic instrument. The crucial thing is how you deal with it. Those with a clear strategy remain calmer and make fewer emotionally charged, incorrect decisions.