Bitcoin & Ethereum Return Distribution Quick Analysis: Live Data
The foundation of the Value at Risk model is the timeseries and underlying change data ( the "shifts"). To estimate VAR, we are essentially applying statistics on the PnL return distribution over some timeframe. In the below, we visualize what BTC and ETH's PnL distribution looks like over the last year.
This graphic is "live" in the sense that it auto-updates with new data points in the timeseries. Each day a return falls out of the last 365 days and a new day is added, so the one year lookback PnL distribution will likely change its appearance over time; especially if volatility increases. Click on either BTC or ETH to change the asset type. The data will dynamically use a date range of Today - 365 days.
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From our initial observations and at the time of publishing of this article, both assets have a return profile that seems fairly symmetrical around 0. But in financial assets and especially crypto, its the "long tail" of huge movement events that create the greatest amount of risk. Both assets also share roughly ~same greatest loss of nearly -40% ... The "fat tailed" distribution goes in both directions. ETH has several days of +20% to the upside. For those who are new to the cryptocurrency space, these are massive moves in % terms on a daily basis for financial markets. In comparison, the S&P 500 might climb or fall more than 4% roughly a handful of times in a year. The volatility in cryptocurrency is easily 2x that level.
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