Creation and analysis of an Adjusted Volatility metric suited for crypto assets
While we are not quite ready to go public with Otium just yet— I thought it would be a good idea to take a breather from the entertaining chaos that is the crypto-currency industry (Forks, ICOs, etc) to complete some old school investment analysis. What better playing field then the wild west of alt-coins?
There are now over 1000 coins on the market, however I chose to only pull return data on the top 30+ coins or at least the ones with data readily available (a big thank you to Alt19.com). In order to determine the most invest-able alt-coin, I pulled hourly returns in the base currency of BTC (since this is the base trading currency for most these coins) to formulate into an adjusted volatility calculation. Using these hourly returns, I then averaged the data and calculated standard deviations on a per day basis to smooth out the numbers. After annualizing, I chose a 2 week rolling average to further scrub this messy data. The analysis below shows YTD 2 week rolling average volatility, YTD median volatility (from the 2 week rolling average sample), and then top 5 rankings of each at the bottom.
A number of coins were not included in this sample due to lack of data available and lack of time as a publicly traded token. Some of these include: Bitcoin Cash, IOTA, NEO, Bitconnect, EOS, OmiseGo, Inconomi. Also, unfortunately, the Top 30 alt-coins have shifted quite a bit since I originally pulled the data towards the end of July.
Some other coins were included in the analysis, but filtered from the charting as their resulting Volatility was higher and did not make the cut. These include: Stellar Lumens, BitShares, Steem, Waves, NEM, Stratis, Decred, and Digibyte.
Also please note that while I refer to these results as “Volatility”, I would say that this is definitely an adjusted volatility metric due to the immense amount of data scrubbing required to make these results presentable.
This analysis does not include any other fundamental research necessary for alt-coin investments, which could include: development team, ecosystem, product, etc — and is meant to be reviewed as is.
YTD 2 week Rolling Average Volatility:
YTD Median Volatility:
As stated previously, the data may vary from other volatility calculations due to starting with hourly data and also given the smoothing/scrubbing methodology which is disclosed above— in other words, a non-standard/adjusted methodology was utilized to normalize a non-standard asset class. I chose to publish due to how interesting the results were, especially on a relative basis.
I own stakes in many of these coins, but my largest digital asset allocation is in Bitcoin. This is not investment advice, and please speak to your financial advisor before taking the plunge into crypto ( WARNING: they may laugh at you ).