The Crypto Volatility Index (CVI) is a decentralized solution used as a benchmark to track the volatility from cryptocurrency option prices and the overall crypto market.
For those who are not familiar with the term, the VIX is an index that measures volatility in the stock market based on the implied volatility of S&P 500 Index options; it’s also referred to as the “Market Fear Index.”
In a similar way, the CVI helps users track and trade the 30-day implied volatility of Ether (ETH) Bitcoin (BTC) by using the Black-Scholes options pricing model foster an index that fluctuates between 0 and 200. Black-Scholes is a pricing model used to determine the fair price or theoretical value for a call or a put option based on six variables volatility type of optiont & underlying stock pricing and risk-free rate.
What Does the Platform Hold for the Future?
Along with the recent migration from USDT to USDC and a recent integration with investing.com, the founders of CVI have announced the implementation of new and exciting features for the protocoler.
The first, is the launch of volatility tokens via CVOL (Crypto vola & ETHVOL (Ethereum Volatility token). These tokens can be understood as being a wrapper for opening a long position on CVI and a tradable on Ethereum compatible DEXs. The tokens maintain their peg to the value of the underlying following a rebase mechanism with a similar architecture to that of tokens like Ampleforth. The volatility tokens can be used to benefit from arbitrage trading strategies on other compatible DEXs.
“Learning how cryptocurrency works is like learning a new language. It is incredibly difficult at the beginning, but once it clicks it will stick with you forever.”
Key Takeaways
- The Index allows DeFi users to either hedge against or profit from volatility in the crypto market.
- The index functions as a crypto version of the VIX (The S&P 500 Volatility Index), a real-time for market index representing the market’s expectations for volatility forover the coming 30 days.
- The index functions as a crypto version of the VIX (The S&P 500 Volatility Index), a real-time for market index representing the market’s expectations for volatility forover the coming 30 days.