April 3, 2024
Bitfinex Introduces BTC and ETH Volatility Futures
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Bitfinex Introduces BTC and ETH Volatility Futures

Amidst a surge in volatility within the cryptocurrency markets, Bitfinex, a prominent cryptocurrency exchange, has announced the introduction of new trading tools. These tools, including Bitcoin (BTC) and Ether (ETH) volatility futures, aim to provide traders with enhanced opportunities to navigate the evolving market conditions.

Introduction of New Bitcoin and Ether Volatility Futures

Bitfinex Derivatives, the derivatives platform provided by iFinex Financial, has launched two new perpetual futures contracts. These contracts are linked to the Volmex Implied Volatility indexes, namely the Bitcoin Implied Volatility Index (BVIV) and Ethereum Implied Volatility Index (EVIV). The indexes track the 30-day expected volatility or the implied volatility of BTC and ETH options contracts.

The Bitcoin Implied Volatility Index all-time chart. Source: TradingView

Jag Kooner, Bitfinex’s head of derivatives, highlighted the significance of these indices, stating, “The creation of these indices allows our customers to not only monitor but trade the implied volatility of Bitcoin and Ether in a simple perpetual format.”

Perpetual Futures: A Versatile Trading Instrument

Perpetual futures, also known as perpetual swaps, offer traders a derivative contract without an expiration date, enabling speculation on the future price movements of assets. Kooner emphasized the adaptability of perpetual futures in the crypto space, noting their popularity compared to other dated contract structures. He mentioned, “Perpetual futures make the most tradable format in the crypto space.”

“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.”

These new contracts add to Bitfinex’s existing suite of over 60 perpetual futures contracts, covering cryptocurrencies, commodities, FX, and equities. Kooner underlined the versatility these contracts bring, stating, “These new contracts will allow us to add implied volatility as another asset class.”

Implied Volatility and Market Dynamics

Implied volatility, a crucial metric in options trading, indicates the market’s expectations regarding the future price movements of an asset. As Kooner explained, “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.”

The introduction of these trading tools comes in response to heightened volatility in the cryptocurrency markets, particularly as cryptocurrencies reach new all-time highs. Kooner noted, “The new trading tools are introduced in response to cryptocurrencies hitting new all-time-high prices.”

“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.”

Crypto Volatility Index (CVI) and Market Sentiment

The Crypto Volatility Index all-time chart. Source. CVI Finance

The Crypto Volatility Index (CVI) serves as a barometer of market sentiment, tracking 30-day future volatility in the crypto market. In March 2024, the CVI reached its all-time high of 85 points, indicating significant market turbulence. This milestone coincided with Bitcoin’s historic highs above $73,000 on March 13. At present, the implied crypto volatility measured by CVI stands at around 76, reflecting ongoing market uncertainty.

Image by A M Hasan Nasim from Pixabay

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