Crypto Options Giant Deribit Launches Bitcoin Volatility Index

The exchange is planning to roll out futures tied to the index soon. It's not a "fear gauge" but an "action gauge."

Mar 31, 2021 at 12:29 p.m. UTC
Updated Sep 14, 2021 at 12:34 p.m. UTC

Panama-based Deribit, the world's largest crypto options exchange by trading volume and open interest, has launched a bitcoin volatility index called DVOL to help traders assess the market's mood.

"DVOL uses the implied volatility smile of the relevant expiries to output one number that gives a gauge of the 30-day annualized implied volatility," the exchange said Wednesday in an announcement.

Implied volatility refers to investors' expectations for price turbulence over a specific time period.

In traditional markets, implied volatility usually picks up during bear markets and subsides during bull runs. A volatility index on the Standard & Poor's 500 Index of large U.S. stocks is popularly known as the "fear gauge."

Deribit refers to its bitcoin volatility index as an "action gauge."

"Market participants need to be able to better understand as well as manage volatility," Deribit CEO John Jansen said. "As the bitcoin options market has matured, the time is now to launch DVOL, enabling further market growth and hopefully soon welcoming a new suite of volatility traders on Deribit."

The exchange plans to roll out futures tied to the bitcoin volatility index soon. That would allow traders to effectively bet on their views regarding near-term market volatility.

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