Derivatives exchange BitMEX will publish an index on 5th January that it hopes will become the bitcoin world’s version of the VIX– the so-called ‘fear index’ that is used to gauge uncertainty in the wider financial markets.
The 30-Day Bitcoin Historic Volatility Index, as BitMEX is calling it, works by taking the time-weighted average price from Bitfinex’s USD/BTC rate. It then calculates bitcoin’s annualised volatility over a rolling 30-day period using that data. The result is a measure of bitcoin’s realised volatility for that period.
True to form as a derivatives exchange, BitMEX has created a tradable instrument based on its new index, and will offer a futures contract quoted in volatility percentage points, with each point paying 0.01 BTC. Traders will receive up to five times leverage for the contract.