CME Bitcoin Volatility index futures began trading last week, giving investors a new way to trade and hedge price volatility. DV Chain and Monarq Asset Management executed the first block trades, initiating contract trading.
These volatility contracts track the CME CF Bitcoin Volatility Index (BVX), which represents the market’s expectations for four-week Bitcoin volatility. Their debut allows traders to take a position directly on expected price turbulence rather than just price direction.
This distinction is important because most derivatives, including futures, perpetual futures, and options, require insight into price movement. Volatility futures eliminate this complexity, allowing traders to express their view solely on how BTC will move in either direction.
This opens the door to a new set of hedging and portfolio strategies that were previously difficult to implement at regulated venues. Consider positioning based on how much Bitcoin might move during events like this week’s US inflation data – traders can buy or sell volatility depending on their outlook.
Shiliang Tang, CEO of Monarq, called the launch a positive step in expanding regulated volatility offerings.
“As bitcoin continues to become a more mainstream institutional asset class, the demand for sophisticated risk management instruments is growing alongside it. Robust tools such as CME Group’s Bitcoin Volatility Futures are exactly what investors need to accurately express their market views and effectively hedge their portfolios in a secure and transparent framework,” he said in the press release.
Monarq Asset Management is an institutions focused company quantitative and systematic digital asset investment company run by former executives of companies such as LedgerPrime, Tower Research and BlockTower Capital. DV Chain is a provider of liquidity and market making services.
The launch of volatility futures expands CME’s existing product line, including standard and micro futures and options contracts on Bitcoin and Ether. The platform’s crypto derivatives business has reached around 266,900 contracts year-to-date, up 38% year-over-year, while average daily open interest stands at around 274,500 contracts, up 18%.
