Standard Deviation

Definition ∞ Standard deviation is a statistical measure that quantifies the amount of variation or dispersion of a set of digital asset prices from its average price. In cryptocurrency markets, a higher standard deviation indicates greater price volatility, meaning prices fluctuate more widely. Conversely, a lower standard deviation suggests that prices are relatively stable. It serves as a key risk metric for investors and traders.
Context ∞ Financial news and crypto analysis frequently use standard deviation to assess the risk associated with different digital assets or portfolios. Discussions often involve comparing the volatility of various cryptocurrencies and how it impacts investment strategies. Understanding standard deviation helps investors evaluate potential price swings and manage their exposure to market fluctuations. Future analytical tools may integrate more dynamic measures of volatility tailored to the unique characteristics of digital asset markets.