Value at Risk

How much of my money is at risk of being lost in a single day?

A VaR historical distribution graph visually represents an asset's historical returns, providing insights into potential outcomes' range and associated probabilities.

When assessing day-to-day activity, users should focus on the central portion of the distribution, which represents the most common returns and losses.

When analyzing the graph, the central region of the graph can help you understand the typical daily price fluctuations and the level of risk you might encounter during normal market conditions.

However, it's crucial to remember that the tail behavior is equally important. If the distribution exhibits a long tail, it indicates a significant probability of extreme price swings or large deviations from a normal distribution. This means that users must be prepared for the possibility of unexpected and substantial market movements, which is especially pertinent for cryptocurrencies known for their volatile and non-linear returns.