A bitcoin “fear gauge,” similar to the Cboe Volatility Index (VIX) investors use to gauge volatility in the stock market, saw its first trades on Wednesday.
The T3i BitVol Index measures the expected 30-day implied volatility in bitcoin derived from tradable bitcoin option prices. It was launched in July 2020 by T3 Index, a research-driven financial firm. It also has a separate index for ethereum.
The transaction consisted of a March expiry 1-by-2 call spread, first reported by Bloomberg. It was bought at no cost. LedgerPrime, a quantitative digital asset investment firm, was the market-maker, according to Bloomberg.
Upon launch, T3 CEO Simon Ho said the BitVol index will allow investors to be “able to make more informed trading decisions as a result.”
Bitcoin on Wednesday flirted with its record highs, reclaiming the $1 trillion market capitalization mark and nearing the record $58,000-level. The price of the world’s most popular cryptocurrency has been buoyed by major institutions piling in, as well as speculation that the third round of stimulus checks will result in more investment in bitcoin.
The BitVol index, the company said, is model-free and uses the variance swap methodology. It is also “designed to use the full range of option strikes to best capture the market outlook on expected volatility.”