We have launched Cryptogram, an India-focused free weekly newsletter on blockchain tech, global crypto markets, and Web 3.0 technologies which promise to change our future. If you would like to subscribe to this newsletter, click here. You can read our past editions here.
A bell curve is a common type of variable distribution in the crypto world. The term "bell curve" refers to the graph used to depict a normal distribution. The Bell curve is basically a symmetrical bell-shaped curve. The most common type of distribution assumed in crypto technical market analysis and other types of statistical analyses are the normal distribution. The mean and standard deviation are the two parameters of the standard normal distribution.
.png?w=640&auto=format%2Ccompress)
<source: Simple psychology>
A bell curve displays the mean, median, and mode of a data set, as well as the probability of data above or below that point. To provide context for the data, the width of the bell curve represents the total range. The most likely outcome is represented by the highest point of the curve (the middle). Everything to the left and right of the center represents an exponentially decreasing probability down to zero. They are usually divided into standard deviations from the mean, which represent different probability ranges. The greater the deviation from the mean, the lower the probability.
The sample mean, or expected value, is the most frequently observed value in the middle of the distribution. The standard deviation is a statistic that describes the width of a normal distribution. In the context of crypto returns, the standard deviation is frequently referred to as volatility. More than 99% of returns are expected to fall within three standard deviations of the mean if returns are normally distributed. These bell-shaped normal distribution characteristics enable analysts and investors to make statistical inferences about the expected return and risk of stocks. Cryptocurrencies with a bell curve usually come with low and predictable volatility.
.png?w=640&auto=format%2Ccompress)
<source: medium>
The bell curve shape can be identified in the first major Bitcoin bull run in late December 2017, when the price rose from around $3,000 to nearly $20,000.
.png?w=640&auto=format%2Ccompress)
<source: medium>
This same curve was visible in the price of Bitcoin in mid-2021 when it rose sharply from $11k to $63k before falling back to $30k.
In a nutshell, symmetrical bell curves are a useful tool in finance and investing. Investors make assumptions about expected future returns based on the normal probability distribution of a stock's past returns. While the use of a bell curve lends itself to the representation of a normal probability distribution, the graphical representation of a bell curve can also be used to determine the four stages of a market cycle and the best time to enter and exit the market.
Use promocode TNM51 at www.giottus.com/profile#promo after registration to get Rs.51 worth free Bitcoin.
Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.