Calculate the Value at Risk for your crypto portfolio. Estimate the maximum expected loss at a given confidence level over a specified time horizon.
Value at Risk (VaR) estimates the maximum potential loss of a portfolio over a specific time period at a given confidence level. For example, a daily VaR of $5,000 at 95% confidence means there is only a 5% chance of losing more than $5,000 in a single day under normal market conditions.
This calculator uses the parametric (variance-covariance) method, which is the simplest and most common VaR approach. It assumes returns follow a normal distribution and uses the portfolio's volatility to estimate potential losses. While the normality assumption doesn't perfectly fit crypto's fat-tailed returns, parametric VaR provides a useful baseline risk estimate.
VaR is widely used in institutional finance for risk budgeting, regulatory compliance, and portfolio management. For crypto traders, VaR helps set realistic expectations for potential losses and ensures risk exposure stays within acceptable limits.
Crypto traders, long-term holders, and DeFi participants benefit from transparent crypto value at risk (var) calculations when planning entries, exits, or portfolio rebalances. Revisit this calculator whenever market conditions shift to keep your strategy grounded in accurate data.
VaR translates abstract volatility into a concrete dollar figure — "there's a 5% chance I could lose more than $X today." This is more intuitive and actionable than raw volatility numbers. Use VaR to set risk limits, size positions, and communicate risk to stakeholders or partners. Real-time recalculation lets you model different market scenarios quickly, so you can act with confidence rather than relying on rough mental estimates.
VaR = Portfolio Value × z × σ × √t Where: z = Z-score for confidence level (1.645 for 95%, 2.326 for 99%) σ = Daily volatility (annual vol / √365) t = Time horizon in days
Result: Daily VaR: $6,025
With a $100,000 portfolio and 70% annual volatility: daily vol = 70% / √365 = 3.66%. At 95% confidence: VaR = $100,000 × 1.645 × 0.0366 = $6,025. There is a 5% probability of losing more than $6,025 in a single day under normal conditions.
Parametric VaR assumes normal distribution and uses volatility directly — it's fast but inaccurate for fat tails. Historical VaR uses actual past returns to estimate future risk — it captures fat tails but is limited by the historical sample. Monte Carlo VaR simulates thousands of scenarios — it's the most flexible but computationally intensive. For crypto, historical or Monte Carlo methods are more accurate.
Crypto markets regularly experience „black swan" events that exceed VaR estimates. The March 2020 crash, May 2021 collapse, and November 2022 FTX bankruptcy all produced losses far exceeding 99% VaR estimates. Use VaR as one tool among many, not as a guarantee. Stress testing with historical extreme events provides essential supplementary insight.
VaR enables systematic risk budgeting: allocate a total VaR budget to your portfolio and distribute it across positions. If your daily VaR budget is $10,000, no single position should have VaR exceeding $5,000. This approach ensures risk is spread evenly and prevents any single bet from disproportionately affecting the portfolio.
95% is standard for most applications. 99% is used for more conservative risk budgets and is often required by regulators. The difference is significant: 99% VaR is about 40% larger than 95% VaR. Choose based on your risk tolerance and requirements.
Parametric VaR underestimates crypto risk because crypto returns have fat tails (extreme moves more frequent than normal distribution suggests). For better accuracy, use historical simulation VaR or modify parametric VaR with higher z-scores. Treat VaR as a minimum risk estimate.
VaR doesn't tell you the magnitude of losses beyond the VaR threshold. If daily VaR is $6,000, losses could sometimes be $20,000 or more. Conditional VaR (CVaR or Expected Shortfall) addresses this by averaging losses that exceed VaR.
Divide annual volatility by √365 for crypto (365 trading days) or √252 for stocks. For 70% annual vol: daily vol = 70% / √365 = 70% / 19.1 = 3.66%. This assumes volatility scales with the square root of time.
Leverage scales VaR proportionally. At 5x leverage, your VaR is 5 times larger than unleveraged. This is because leverage amplifies both gains and losses. A $6,000 unleveraged daily VaR becomes $30,000 at 5x leverage.
Both. Position-level VaR helps size individual trades. Portfolio-level VaR accounts for diversification benefits (correlations between assets). Portfolio VaR is typically lower than the sum of individual VaRs due to imperfect correlations.