Annualized Volatility (Sigma)
Risk MetricAnnualized Volatility (sigma) measures how much a price fluctuates over a year, calculated as the standard deviation of daily log returns scaled by √365.
Volatility (sigma, σ) is the statistical measure of price dispersion. For crypto, it is calculated from daily log returns: ln(today's close / yesterday's close). The daily standard deviation is then annualized by multiplying by √365 (the number of trading days in a year for crypto — unlike equities which use √252 because stock markets are closed on weekends).
A sigma of 80% means that in a typical year, the price could swing roughly ±80% from its starting value (assuming normally distributed returns — which crypto is not, but sigma is still the standard convention). XRP's annualized sigma has historically ranged from 70-100%, while smaller ISO 20022 coins like IOTA and QNT often show 80-130%.
High sigma is not inherently bad for investors with a long time horizon — it means more potential upside, but also more potential downside. The Sharpe and Sortino ratios contextualize sigma by measuring whether the return was worth the volatility experienced.
Crypto Relevance
Comparing sigma across ISO 20022 coins helps investors understand relative risk: XRP typically has lower sigma than IOTA or QNT, making it the "safer" ISO 20022 play in terms of price stability, even if its upside is also more limited.
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Join ISO 20022 investorsRelated Terms
Sharpe Ratio
Sharpe Ratio is a measure of risk-adjusted return calculated as (annualized return − risk-free rate) ÷ annualized volatility.
Sortino Ratio
Sortino Ratio is like the Sharpe Ratio but only penalizes downside volatility, making it better for assets like crypto where large upside moves are common and desirable.
Max Drawdown
Max Drawdown is the largest peak-to-trough price decline in a given period — the worst-case loss for someone who bought at the exact high and held through the lowest point.
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Last reviewed: 2026-05-17