Is Cardano Crypto Coin high risk? (Crypto:ADA) - Macroaxis (2024)

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Since volatility provides cryptocurrency investors with entry points to take advantage of coin prices, investors in projects such as Cardano can benefit from it. Downward market volatility can be a perfect environment for traders who play the long game. Here, they may buy additional Cardano shares at lower prices. For example, an investor can purchase Cardano coin that has halved in price over a short period. This will lower your average cost per share, thereby improving your portfolio's performance when the markets normalize. Similarly, when the prices of Cardano's crypto rise, investors can sell out and invest the proceeds in other coins with better opportunities. Investing in volatile markets will allow investors in evolving Defi or crypto projects such as Cardano to generate better long-term returns.

Moving together with Cardano Crypto Coin

Cardano Market Sensitivity And Downside Risk

Cardano's beta coefficient measures the volatility of Cardano crypto coin compared to the systematic risk of the entire stock market represented by your selected benchmark. In mathematical terms, beta represents the slope of the line through a regression of data points where each of these points represents Cardano crypto coin's returns against your selected market. In other words, Cardano's beta of -0.58 provides an investor with an approximation of how much risk Cardano crypto coin can potentially add to one of your existing portfolios.

Cardano shows above-average downside volatility for the selected time horizon. We advise cryptocurrency investors to inspect Cardano further and ensure that all market timing and asset allocation strategies are consistent with the estimation of Cardano future alpha. Please note that many cryptocurrencies are speculative and subject to artificial price hype. Ensure you understand the upside potential and downside risk of investing in Cardano. We encourage all cryptocurrency investors to look for signals such as email spams, message board hypes, claims of breakthroughs, volume upswings, sudden news releases, promotions that are not reported, or demotions released before the public announcements. Please also check the biographies and work history of current and past project contributors before investing in high-volatility crypto coins. You can indeed make money on Cardano if you perfectly time your entry and exit. However, remember that cryptos that have been the subject of artificial hype usually cannot maintain its increased price for more than a few days. The price of a promoted high-volatility instrument will almost always revert. The only way to increase coin holder value is through legitimate performance analysis backed up by solid fundamentals of the project the coin represents. Understanding different market volatility trends often help investors time the market. Properly using volatility indicators enable traders to measure Cardano's crypto coin risk against market volatility during both bullish and bearish trends. The higher level of volatility that comes with bear markets can directly impact Cardano's price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different cryptos as prices fall or investing in DeFi projects.

3 Months Beta |Analyze Cardano Demand Trend

Check current 90 days Cardano correlation with market (NYSE Composite)

Cardano standard deviation measures the daily dispersion of prices over your selected time horizon relative to its mean. Typical volatile equity has a high standard deviation, while the deviation of a stable instrument is usually low. As a downside, the standard deviation calculates all uncertainty as risk, even when it is in your favor, such as above-average returns.

It is essential to understand the difference between upside risk (as represented by Cardano's standard deviation) and the downside risk, which can be measured by semi-deviation or downside deviation of Cardano's daily returns or price. Since the actual investment returns on holding a position in cardano crypto coin tend to have a non-normal distribution, there will be different probabilities for losses than for gains. The likelihood of losses is reflected in the downside risk of an investment in Cardano.

Cardano Crypto Coin Volatility Analysis

Cardano Projected Return Density Against Market

Assuming the 90 days trading horizon Cardano has a beta of -0.5776 . This suggests as returns on benchmark increase, returns on holding Cardano are expected to decrease at a much lower rate. During the bear market, however, Cardano is likely to outperform the market.

Most traded cryptocurrencies are subject to two types of risk - systematic (i.e., market) and unsystematic (i.e., nonmarket or coin-specific or project-specific) risk. Unsystematic risk is the risk that events specific to Cardano project will adversely affect the coin's price. This type of risk can be diversified away by owning several different digital assets on different exchanges whose coin prices have shown a small correlation to each other. On the other hand, systematic risk is the risk that Cardano's price will be affected by overall cryptocurrency market movements and cannot be diversified away. So, no matter how many positions you have, you cannot eliminate market risk. However, you can measure a Cardano crypto's historical response to market movements and buy it if you are comfortable with its volatility direction. Beta and standard deviation are two commonly used measures to help you make the right decision.

The company has an alpha of 1.5669, implying that it can generate a 1.57 percent excess return over NYSE Composite after adjusting for the inherited market risk (beta).

Cardano's volatility of a cryptocurrency is measured either by using standard deviation or beta. Standard deviation will reflect the average amount of how cardano crypto coin's price will differ from the historical average after some time. There is a big difference when you buy Cardano from a government-approved cryptocurrency exchange like Coinbase or a marketplace managed by a foreign entity. Using a local, USA-based marketplace will be less exposed to price manipulation. However, just like with stock markets, cryptocurrencies fluctuate because it is influenced by constant media hype, basic supply and demand laws, investor sentiments, and government regulations. These factors work together to add to Cardano's price volatility.

Cardano Crypto Coin Risk Measures

Most traded cryptocurrencies are subject to two types of risk - systematic (i.e., market) and unsystematic (i.e., nonmarket or coin-specific or project-specific) risk. Unsystematic risk is the risk that events specific to Cardano project will adversely affect the coin's price. This type of risk can be diversified away by owning several different digital assets on different exchanges whose coin prices have shown a small correlation to each other. On the other hand, systematic risk is the risk that Cardano's price will be affected by overall cryptocurrency market movements and cannot be diversified away. So, no matter how many positions you have, you cannot eliminate market risk. However, you can measure a Cardano crypto's historical response to market movements and buy it if you are comfortable with its volatility direction. Beta and standard deviation are two commonly used measures to help you make the right decision. Assuming the 90 days trading horizon the coefficient of variation of Cardano is 267.11. The daily returns are distributed with a variance of 17.4 and standard deviation of 4.17. The mean deviation of Cardano is currently at 2.99. For similar time horizon, the selected benchmark (NYSE Composite) has volatility of 0.

Cardano Crypto Coin Return Volatility

Cardano historical daily return volatility represents how much of Cardano crypto's daily returns swing around its mean - it is a statistical measure of its dispersion of returns. Keep in mind that cryptocurrencies such as Cardano have only been around for a short time and are still in the price discovery phase. This means that prices will continue to change as investors and governments work through the initial concerns until prices stabilize, provided a stable point can be reached. Cardano assumes 4.1716% volatility of returns over the 90 days investment horizon. By contrast, NYSE Composite accepts 0.8006% volatility on return distribution over the 90 days horizon.

Check out Trending Equities to better understand how to build diversified portfolios, which includes a position in Cardano. Also, note that the market value of any cryptocurrency could be tightly coupled with the direction of predictive economic indicators such as signals in bureau of economic analysis.

Note that the Cardano information on this page should be used as a complementary analysis to other Cardano's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.