Historical Variance Analysis

Historical variance analysis is the study of an asset's past price fluctuations to predict future behavior and assess risk. By calculating the standard deviation of returns over various timeframes, analysts can determine how volatile an asset has been.

This data is essential for setting initial collateral requirements and establishing liquidation thresholds. While historical data does not guarantee future results, it provides a baseline for understanding the risk profile of an asset.

Protocols use this analysis to build more robust models that account for the unique volatility characteristics of different digital assets.