Upside volatility
Why do big price swings sometimes feel very different depending on which direction they push a holding?
In plain words
Upside volatility describes large price swings that move in a holder's favour. Volatility itself measures the size of price movement regardless of direction, but a holder experiences it as a sharp gain when the market rises, and as a loss when it falls.
Why it matters
Volatility is usually quoted as a single number, so it can hide which direction the swings took. A holder who sees a large gain during a volatile week may assume the market was calm and safe, when in fact the same week carried wide moves that could just as easily have gone the other way.
In a real week: BTC, week of 12 February 2018
In the week of 12 February 2018, BTC rose 28.77% from 8063.82 to 10383.43, with a range of 40.0% and realised volatility of 114.3% annualised. The low of 8053.0 came at 2018-02-12 00:00 UTC, before the high of 11274.0 at 2018-02-18 02:00 UTC, and the best day, 2018-02-14, gained 10.72%. The largest single hour was a fall of -5.23% on 2018-02-18 05:00 UTC, and the worst day, 2018-02-18, lost -5.94%. The close finished at 72.4% of the week range, in the upper third.
A common mistake
Reading a strong gain as a sign of low risk. A week that produced a large positive return may still contain wide swings and sharp reversals, and the same level of volatility could produce a mirrored loss.