Bitfinex, a cryptocurrency exchange, is expanding its trading tools in response to the recent spike in volatility in the crypto markets. They have introduced new Bitcoin (BTC) and Ether (ETH) volatility futures on their derivatives platform, Bitfinex Derivatives. These futures contracts are based on the Volmex Implied Volatility indexes, specifically the Bitcoin Implied Volatility Index (BVIV) and Ethereum Implied Volatility Index (EVIV). These indexes track the 30-day expected volatility of BTC and ETH options contracts.
According to Jag Kooner, Bitfinex’s head of derivatives, the creation of these indices allows customers to monitor and trade the implied volatility of Bitcoin and Ether in a simple perpetual format. Perpetual futures, also known as perpetual swaps, are derivative contracts that don’t have an expiration date, allowing traders to speculate on the future price of an asset.
Kooner believes that perpetual futures are the most tradable format in the crypto space since other contracts rely on a dated structure. Bitfinex already offers over 60 perpetual futures contracts, including cryptocurrencies, commodities, FX, and equities. These new contracts will add implied volatility as another asset class.
Implied volatility is a metric used in options trading to measure the expected change in an asset’s value over a specific period of time. When investors expect a lot of movement, volatility rises, but if they anticipate muted price movement, volatility contracts.
Bitfinex introduced these new trading tools in response to the recent all-time-high prices of cryptocurrencies. In March 2024, cryptocurrency volatility reached its peak, with the Crypto Volatility Index (CVI) hitting 85 points on March 11. This index tracks the 30-day future volatility and acts as a “market fear index” for the crypto market. Just two days later, Bitcoin reached its historic highs above $73,000. Currently, the implied crypto volatility measured by the CVI is around 76.