Annualized Volatility

Annualized volatility is the standard deviation of an asset's returns scaled to a one-year time horizon. Since market data is often collected on a daily or hourly basis, annualizing the figure allows for a consistent comparison between different assets and timeframes.

The calculation typically involves multiplying the standard deviation of returns by the square root of the number of periods in a year. This normalization is critical in finance because it provides a standardized way to communicate risk across global markets.

In the cryptocurrency sector, where volatility is often extremely high, annualizing these figures helps investors understand the magnitude of risk relative to traditional assets. It is a necessary step for any quantitative model that requires consistent inputs.