Bitfinex Derivatives is allowing investors to trade on the implied volatility of Bitcoin and Ether as another asset class.
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Cryptocurrency exchange Bitfinex is expanding trading tools in response to a volatility spike in crypto markets by introducing new Bitcoin
ETH
$3,343 volatility futures.
Bitfinex’s derivatives platform Bitfinex Derivatives, provided by iFinex Financial, launched trading of two new perpetual futures contracts,
The new contracts are based on the Volmex Implied Volatility indexes, the Bitcoin Implied Volatility Index (BVIV) and Ethereum Implied Volatility Index (EVIV). The indexes track 30-day expected volatility or the implied volatility of BTC and ETH options contracts.
The Bitcoin Implied Volatility Index all-time chart. Source: TradingView
“The creation of these indices allows our customers to not only monitor but actually trade the implied volatility of Bitcoin and Ether in a simple perpetual format,” Bitfinex’s head of derivatives, Jag Kooner,
Perpetual futures, also known as perpetual swaps or perpetuals, are a type of derivative contract that allows traders to speculate on the future price of an asset without an expiration date.
According to Kooner, perpetual futures make the “most tradable format in the crypto space,” as other contracts rely on a dated structure. He noted:
“Tracking the 30-day implied volatility in Bitcoin and Ether options contracts without the need to roll — i.e. dated futures — opens up the product to both retail and institutional investors alike.”
The new contracts join over 60 perpetual futures contracts available on Bitfinex, including not only cryptocurrencies but commodities like precious metals and oil, FX and equities. “These new contracts will allow us to add implied volatility as another asset class,” Kooner stated.
In options trading, implied volatility is a metric indicating how much the market expects the value of an asset to change over a certain period of time.
If investors expect a lot of movement, the volatility rises, but if the expectation is that an asset’s price movement will be muted, then volatility contracts.
Kooner mentioned the new trading tools are introduced in response to cryptocurrencies hitting new all-time-high prices. He noted:
“With many crypto prices reaching new ATHs, the likelihood of increased volatility and significant drawdowns means there is more utility for these indexes than ever.”
The news comes after cryptocurrency volatility broke all-time highs in March 2024. The Crypto Volatility Index (CVI), which tracks 30-day future volatility and serves as a “market fear index” to the crypto market, topped at 85 points on March 11
The Crypto Volatility Index all-time chart. Source. CVI Finance
The CVI’s all-time high came just two days before Bitcoin reached its historic highs above $73,000 on March 13. At the time of writing, the implied crypto volatility measured by CVI values around 76.
