Volatility Spike Analysis

Definition ∞ Volatility spike analysis is the examination of sudden, sharp increases in an asset’s price fluctuations. This analysis seeks to identify the causes, duration, and potential market impact of such rapid changes in price variability. It involves studying trading volumes, order book dynamics, and related news events during these periods. The goal is to understand the underlying forces driving extreme market movements.
Context ∞ Crypto news often features volatility spike analysis when explaining rapid price changes or market crashes, seeking to attribute these events to specific catalysts. Traders and analysts use this analysis to assess market risk and identify potential entry or exit points. Understanding volatility spike analysis is crucial for interpreting sudden and dramatic shifts in digital asset prices.