Crypto derivatives exchange Deribit will soon launch Bitcoin (BTC) volatility futures, giving investors a direct way to measure and trade BTC market volatility.
On March 17, Deribit introduced BTC futures DVOL, a derivative contract based on the Deribit Bitcoin Volatility Index that measures implied volatility of the largest cryptocurrency. Deribit’s Volatility Indicator provides a 30-day outlook on investor expectations for annual volatility.
Like other volatility products, BTC DVOL can potentially help traders with risk management, portfolio hedging or market speculation.
Volatility as an asset is widely traded in traditional finance, with the most popular product being the Chicago Board Options Exchange Volatility Index, also known as the VIX. The VIX fluctuates on a scale of 1 to 100, with 20 representing the historical average. Values below 20 signal lower implied volatility than the historical average. Values above 20 are usually associated with more turbulent financial conditions; anything above 30 signals significant market volatility, usually due to investor uncertainty, risk or fear.
The VIX measures the volatility of options on the S&P 500 index, the main indicator of the US stock market.
Bitcoin and the broader crypto markets have showed extreme volatility for the last 12 months. The period known as crypto winter is usually associated with deep price corrections in digital assets after an overly extended bull phase.
Related: Crypto acted as a safe haven between SVB and Signature bank run: Cathie Wood
Although crypto investment products experienced record lows Last week, after the collapse of Silicon Valley Bank and Signature Bank, regulatory clarity around bitcoin investor deposits helped stage a major relief rally. The price of Bitcoin surpassed $27,000 on March 17 for the first time in more than nine months.