Understanding Volatility and Drawdowns

Why an 80 percent drawdown is a structural feature of this market, and how professionals plan for it.

Drawdown history

Major digital assets have repeatedly fallen 70 to 85 percent from cycle highs and subsequently recovered. Investors who size positions ignoring this history rarely survive it.

Volatility is not risk

Volatility is dispersion. Risk is permanent loss of capital - from leverage, forced selling, custody failure or a broken thesis.

Planning tools

Pre-committed rebalancing bands, staged entry over time and a cash buffer reduce the chance that a drawdown converts into a permanent loss.

Key takeaways

• Drawdown history: Major digital assets have repeatedly fallen 70 to 85 percent from cycle highs and subsequently recovered.
• Volatility is not risk: Volatility is dispersion.
• Planning tools: Pre-committed rebalancing bands, staged entry over time and a cash buffer reduce the chance that a drawdown converts into a permanent loss.

Risk disclosure

This article is educational content published by Vaultero Capital and is not investment advice, a recommendation, or an offer to buy or sell any asset. Digital assets are highly volatile and you may lose some or all of the capital you commit. Projected or historical returns are not a reliable indicator of future performance. Consider your objectives, time horizon and tolerance for loss, and seek independent professional advice where appropriate. Full terms are set out in our risk disclosure.