Skip to content

Memecoin Volatility Analysis

Right then, memecoins. These mischievous little digital tokens exhibit price swings that would make a roller-coaster blush. This article delves into the volatility of various popular memecoins, focusing on the price changes, correlations, and the nature of their deviations. This analysis is based on daily price data.

Volatility is a key metric for understanding the price stability of a cryptocurrency. It is typically measured using the standard deviation of daily price changes, which quantifies the amount of variation or dispersion of a set of prices.

From these values, BONK stands out with the highest volatility in price changes, indicating significant daily price swings compared to the other memecoins.

Understanding the direction of volatility can further clarify the nature of these price movements. Upside deviation measures the variation when prices change positively, while downside deviation measures when prices change negatively.

PEPE exhibits significant deviations in both directions, indicating its propensity for large price movements, whether rising or falling. BONK also shows considerable upside and downside deviations, reflecting its similar behaviour but to a lesser extent.

Interesting Correlations

Correlations between the price changes of different memecoins can reveal whether their price movements are related. A correlation coefficient ranges from -1 (perfect negative correlation) to 1 (perfect positive correlation), with 0 indicating no correlation.

 

Key correlations observed:

- DOGE and SHIB: 0.8318 - Strong positive correlation

- PEPE and BONK: 0.7296 - Strong positive correlation

- FLOKI and BONK: 0.7839 - Strong positive correlation

- DOGE and BOME: 0.7430 - Strong positive correlation

These correlations suggest that DOGE and SHIB often move in tandem, as do PEPE and BONK, and FLOKI and BONK. The strong correlation between DOGE and BOME is particularly interesting, indicating that these two coins may respond similarly to market conditions.

Conclusion

Memecoins are inherently volatile, with BONK being the most volatile among the analysed coins in terms of daily price changes. The significant correlations between certain pairs of memecoins hint at shared market influences or investor behaviour patterns.

Memecoins may seem thrilling, but they are also a minefield. These digital tokens can offer astronomical gains, but they’re just as likely to deliver gut-wrenching losses. As with any high-risk investment, it’s vital to stay informed, remain vigilant, and only invest what you can afford to lose.