Definition ∞ Volatility risk assessment is the systematic process of evaluating and quantifying the potential for rapid and significant price fluctuations in digital assets. This assessment considers historical price movements, market liquidity, external economic factors, and specific asset characteristics to gauge future price instability. Its purpose is to help investors and traders understand the potential range of price changes and the associated risks to their portfolios. A thorough assessment informs risk management strategies.
Context ∞ News reports on cryptocurrency markets frequently incorporate volatility risk assessments, especially when discussing investment strategies or market outlooks. Analysts often highlight these assessments to explain the inherent risks of digital assets and to guide investors in making informed decisions. The continuous evolution of the crypto market necessitates ongoing and dynamic volatility risk evaluations.
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