Bitfinex, a popular 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, provided by iFinex Financial.
These new 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 or the implied volatility of BTC and ETH options contracts.
Jag Kooner, the head of derivatives at Bitfinex, stated that the creation of these indices allows customers to not only monitor but also trade the implied volatility of Bitcoin and Ether in a simple perpetual format.
Perpetual futures, also known as perpetual swaps or perpetuals, are derivative contracts that allow traders to speculate on the future price of an asset without an expiration date. Kooner mentioned that perpetual futures are the most tradable format in the crypto space, as they do not rely on a dated structure.
These new contracts join the existing list of over 60 perpetual futures contracts available on Bitfinex, which include cryptocurrencies, commodities, FX, and equities. Kooner stated that these new contracts will add implied volatility as another asset class.
Implied volatility is a metric used in options trading to indicate 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 for muted price movement, then volatility contracts.
These new trading tools have been introduced in response to the recent surge in cryptocurrency prices, with Bitcoin reaching historic highs above $73,000 in March 2024. The Crypto Volatility Index (CVI), which tracks the 30-day future volatility and serves as a “market fear index” for the crypto market, reached its all-time high of 85 points on March 11.
At the time of writing, the implied crypto volatility measured by CVI values around 76.