Crypto derivatives exchange Deribit will launch Bitcoin (BTC) volatility futures shortly, offering investors a direct way to measure and trade BTC market volatility.
On March 17, Deribit introduced BTC DVOL futures, a derivative contract based on the Deribit Bitcoin Volatility Index, which measures the implied volatility of the largest cryptocurrency. Deribit’s volatility indicator provides a 30-day view of investors’ annualized volatility expectations.
Like other volatility products, BTC DVOL can help traders with risk management, portfolio hedging, or market speculation.
Volatility as an asset is heavily traded in traditional finance, with the most popular product being the Chicago Board Options Exchange’s Volatility Index, also known as the VIX. The VIX fluctuates on a scale of 1 to 100, where 20 represents the historical average. Readings below 20 indicate implied volatility below the historical average. Readings above 20 are often associated with more turbulent financial conditions; anything above 30 indicates significant market volatility, typically due to investor uncertainty, risk, or fear.
The VIX measures the volatility of options on the S&P 500 Index, a leading indicator of the US stock market.
Bitcoin and the cryptocurrency markets in general have shown extreme volatility in the last 12 months. The period known as the crypto winter is usually associated with deep corrections in the prices of digital assets after an excessively long bullish phase.
Although cryptocurrency investment products saw record outflows last week following the failure of Silicon Valley Bank and Signature Bank, regulatory clarity on investor deposits has helped Bitcoin stage a big relief rally. The Bitcoin price topped $27,000 on March 17 for the first time in more than nine months.
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