Max Drawdown
Risk MetricMax 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.
Max Drawdown measures the maximum observed loss from a peak price to a subsequent trough before a new peak is reached. It is expressed as a negative percentage: a max drawdown of −80% means the price fell 80% from its highest point before recovering.
To recover from an 80% drawdown, you need a 400% gain. To recover from a 90% drawdown, you need a 900% gain. This asymmetry is why drawdown is one of the most practically important risk metrics for long-term investors — it tells you how bad the pain could get and how far you need to travel to get back to break-even.
Crypto drawdowns routinely reach 80-95% even for established assets like Bitcoin. Among ISO 20022 coins over the 1-year window through 2026, max drawdowns range from around −50% (QNT) to −80% (ADA, IOTA). Comparing max drawdown across coins identifies which held up best during the most recent market correction.
Worked example: a coin that peaks at $3.00 and falls to $0.60 before setting a new high has a max drawdown of (0.60 − 3.00) ÷ 3.00 = −80%. Getting from $0.60 back to $3.00 is a 5× move — a +400% gain just to break even.
Crypto Relevance
Max Drawdown is arguably the most emotionally relevant risk metric for ISO 20022 investors — it quantifies the "this is fine" moment when a coin you're holding is down 70% and you're wondering if it will recover. Informational only, not investment advice.
Get the institutional context, investment implications, and common misconceptions about Max Drawdown — a When Moon 589 editorial deep dive for ISO 20022 investors.
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Join ISO 20022 investorsRelated Terms
Annualized Volatility (Sigma)
Annualized Volatility (sigma) measures how much a price fluctuates over a year, calculated as the standard deviation of daily log returns scaled by √365.
Sharpe Ratio
Sharpe Ratio is a measure of risk-adjusted return calculated as (annualized return − risk-free rate) ÷ annualized volatility.
Risk-Adjusted Return
Risk-adjusted return measures how much return an investment produced relative to the risk taken to earn it, not just the raw gain.
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Last reviewed: 2026-07-03