Steemit Crypto Academy Contest / S14W2 - Volatility in cryptocurrencies.

Hello wonderful community members , accept my greetings today as we advanced in second week of SEC season 14 . We have a wonderful theme to explore this week as it is more practical and so is equally interesting. Let's talk about volatility in cryptocurrencies.

^{Taken from my trading view for decorative tinhe here}

In your own words, how does volatility affect cryptocurrencies? Is it beneficial or detrimental.

As for my experience of trading in cryptocurrencies is concerned, I think that volatility is beneficial for me and for other experienced traders who have given time to the market. However, for beginners it can be detrimental because it can wipeout their capital.

Volatility refers to fluctuation in the price of an asset over a short period of time. If there is significant change in the price within a smaller period of time, it means that an asset is more volatile and vice versa. Volatility of the cryptocurrencies, except stable coins, is the inherent feature and is one of the main factor that attracts people towards it.

It is the magnitude of volatility that determines the profit of trader in the market. It's also important to mention that volatility can also be responsible for loss, if the trade or investment taken does not go into the desire direction. However for experienced traders who can murtidallize the volatility, it is a blessing.

If volatility factor is absent in cryptocurrencies then it is better to invest in mutual funds where funds are managed by experienced and professional fund managers and some minimal growth can be guaranteed over a long period of time. Beside the decentralized nature of blockchain, volatility is a greatest source of attraction for crypto investors.

Name and describe a technical indicator that measures the market volatility of an asset.

There are various volatility indicatora in the crypto market and some of the best volatility indicators are:

• Bollinger Bands
• ATR – Average True Range Indicator
• RVI – Relative Volatility Index
• VIX – Volatility Index
• Keltner Channel Indicator
• Donchian Channel Indicator
• Chaikin Volatility Indicator
• Twiggs Volatility Indicator

Having mentioned various volatility indicators and some have dreadful names but for the sake of this task, I'll describe Bolinger Bands as it is the most common volatility indicator used. Besides volatility Bollinger Bands also help in finding overbought and oversold regions. This indicator also helps in determining support and resistance and finding trend in the market. As of now , let's focus on it's use in volatile market to determine volatility.

Use of Bollimger bands in determining volatility is as simple as ABC and let me tell you how it works in the context of volatility.

Bollinger Bands is an indicator based on simple moving average and is a profitable tool for traders. It was developed by John Bollinger to indicate various trading signals. A Bollinger Band is composed of three lines which form bands and hence the name. The middle line of BB represents the simple moving average (SMA) and the upper line is set plus two standard deviations ( + 2 SD) above the simple moving average and the lower line is set at minus 2 standard deviations ( - 2 SD) below the simple moving average. The Simple moving average (middle line) that is commonly used in Bollinger Bands is 20 - days SMA. However, It is not fixed, it can be changed by trader as per your convenience but best results have been seen by trading professionals with this reference. So the best set up is 20 days SMA and + 2SD for upper band and -2SD for lower band as mentioned above.

Bolinger bands show volatility of the market with fair degree of accuracy. The concept is quite simpler and goes like this; the wider the bollinger bands ( upper and lower) , the more volatile is the market. On the other hand , closer the upper and lower bollinger bands , less volatile is the market.

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Look at above screenshot, around 25 sep 2023 Bollinger Bands are close together as compared to 23 oct 2023 . We can further see that around 25 sep , candlesticks are short which shows movement of price within a narrow range while as around 23 oct candlesticks are big and price has shown significant movement as can be seen by rays that mark high and low of the days.

Describe the step-by-step to be able to include this indicator in the STEEM/USDT chart. You can use the Tradingview platform. Show screenshots.

Adding Bollinger Bands to chart.

I'll be using trading view app. You can do it from official website of trading view too.

• Launch the tradingview app.

• Select any trading pair. Chart of the pair will load. I have choosen BTC/USDT pair (Arrow 1).

• Click on indicators from the top menu. In my case (iPad), i have Indicators icon (Arrow 2) at bottom of the chart

• Type the name of the indicator in search box. I typed Bollinger Bands and click on the same indicator once.

• Go back to the chart, we find that the chart along with indicator is loaded .

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Explain in your own words, what happened to the volatility in the last month of the STEEM/USDT chart.

In the screenshot, above, I have chosen the chart of STEEM/USDT between November 4 and December 4. To begin with, we can see that the Bollinger Bands were close to each other for the first few days. Then, the gap between the upper and lower bands significantly increased, reflecting an increase in volatility during that period, as evidenced by the larger size of candles.

Towards the middle of the chosen period, the bands started to come together again, indicating a decrease in volatility, as manifested by the decreasing size of the candles.

As we move towards the end, we can observe that the bands have further closed in on each other, and the size of candles has significantly decreased. This reflects a decrease in the volatility of the price of STEEM in the last two weeks.

So the overall scenario is that, initially the volatility was less which increased towards the middle of the month and then decreased towards the end.

Do you think the future of cryptocurrencies is more stable? Give your own opinion

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When we look at the global scenario, it's difficult to predict the future of cryptocurrencies. We have seen that some countries are discouraging the adoption of cryptocurrency by either banning or imposing heavy taxes. On the other hand, we can see that some big hands are coming with innovative projects like Bitcoin ETF, which manifests highly positively in the market.

If you predict the future by looking at one pole, it seems that the future of cryptocurrencies is dark, while when we look at the other pole, we may land in FOMO because the future seems highly optimistic and bright.

As the world is technologically advancing, cryptocurrency seems to have taken a front seat in the field of technology, and therefore the future seems to be stable. The decentralized and non-regulatory current status of cryptocurrencies is worrisome for various regulatory authorities, and they are trying to gain control over the crypto market. So, it's clear that the future of cryptocurrency is not easy to predict. However, as for my personal opinion, I think that the future of cryptos is going to remain bright and stable.