The Bitcoin Volatility Index
The Bitcoin volatility index is a useful tool to help traders and investors determine the potential for price fluctuations in their investments. The index measures how much the price of a Bitcoin has deviated from the average over a specific time period. A low value indicates price stability. The higher the volatility index, the higher the risk associated with an investment. However, the volatility index can be misleading and should only be used as a guide and not as a substitute for other investment techniques.
The BVIX is derived from the implied volatility of bitcoin options market prices and represents a useful tool for institutional investors. CryptoCompare’s Bitcoin Volatility Index (BVX) live streams the BTC market and is based on research design developed by Professor Carol Alexander, of University of Sussex Business School. In addition, the index excludes’mark-prices’ that are reported on exchange networks and do not reflect the supply and demand in real time.
As Bitcoin is a speculative asset, it is incredibly volatile. Despite its volatile price, it has shown outstanding signs of stability in recent months. During COVID-19, Bitcoin’s volatility index reached a 17-month low. Moreover, during COVID-19, the price of Bitcoin traded in a narrow range, which some experts view as a sign of the cryptocurrency’s maturation. The volatility index reflects this, but there is no way to predict it.