Key Points
- CF Benchmarks has introduced a Bitcoin Volatility Index for tracking and trading 30-day forward-looking bitcoin price volatility.
- The index is composed of two indices, BVX and BVXS, which aggregate implied volatility from bitcoin options contracts.
CF Benchmarks, a UK-based firm, has unveiled its Bitcoin Volatility Index. This new product is designed to track and trade the 30-day forward-looking price volatility of Bitcoin.
Understanding the Bitcoin Volatility Index
The Bitcoin Volatility Index is made up of two indices, namely the CF Bitcoin Volatility Real Time Index (BVX) and the CF Bitcoin Volatility Index Settlement Rate (BVXS). These indices combine the implied volatility derived from Bitcoin options contracts listed on the Chicago Mercantile Exchange into a single value. This value is used to assess market volatility and uncertainty.
Volatility indices are crucial in financial markets as they provide a means to measure investor sentiment and risk appetite, according to CF Benchmarks CEO Sui Chung.
Real-time Tracking and Market Sentiment
The BVX index is updated approximately every second to provide real-time Bitcoin volatility. The BVXS index, on the other hand, calculates the daily settlement rate based on a 30-minute window of BVX observations between 1530 pm and 1600 pm London time.
CF Benchmarks’ Bitcoin Volatility Index is expected to serve as the benchmark for Bitcoin price volatility, similar to how the Bitcoin Reference Rate (BRR) is the benchmark for spot Bitcoin. The new volatility index can be used as risk sentiment data or as the settlement mechanism for a range of products. This allows market participants to trade volatility and is compliant with UK Benchmarks Regulation (BMR).
Thomas Erdosi, CF Benchmarks Head of Product, stated that crypto market participants need the ability to trade volatility in crypto just like they can in other asset classes. He also noted that the new index enables participants to gauge market sentiment.
