Most people today are extremely hesitant to enter the crypto marketplace as the word volatile goes hand in hand with the crypto space. In a matter of seconds, you can go from riches to rags. There is no control over the movement of the crypto market. The bull crypto market can make several people millionaires and the bear market can completely evaporate a person’s life savings.
Now, volatility in itself is a neutral term, usually associated with words like greater risk, deeper uncertainty, or market decline but it is a statistical parameter to measure price changes in securities. Greater volatility signifies extreme and bigger movements in the direction of price movements i.e., higher and lower in short period spans.
Even with the surge of up to $150 million dollars in May 2021 in the Decentralized Finance space, there is always a looming threat of losing money due to the volatility present in the crypto space. This in return sets up a good opportunity for volatile trading, the next big development in the DeFi ecosystem. Volatile trading gives users the opportunity to make profits from the volatile nature of the cryptocurrency market.
Keeping this in mind and the rise of the derivative market there is a growing need for tracking the volatility of the cryptocurrency market and pricing strategies as well as reliable risk measurement tools.
To combat the fear associated with volatility and provide an opportunity to capitalize on it, COTI a leading enterprise-grade fintech platform optimized for decentralized payments has brought in a way to outmaneuver the volatility problem. COTI has introduced its decentralized Crypto Volatility Index (CVI) which aids users to capitalize on market fluctuations in any direction either higher or low extremes of the market.
What is The Crypto Volatility Index?
The Crypto Volatility Index (CVI) is a VIX, first of its kind, decentralized crypto volatility index. It provides users with an option to hedge themselves against market volatility and impermanent loss.
VIX is a traditional volatility index that measures how much volatility is expected in the traditional stock market over the next 30 days. It is considered as implied volatility as VIX tracks the options market, where bets are made about the future performance of the different market indices and securities.
In comparison with VIX, CVI is decentralized in nature and unbiased since it is not controlled by any crypto stock exchange.
The Crypto Volatility Index (CVI) was launched on the Ethereum MainNet on 20th January 2021 by the COTI team that partnered with Prof. Dan Galai, developer of the original VIX and part of the CVI board of advisors, that was developed to establish a ‘market fear index’ for the crypto marketplace.
The Crypto Volatility Index (CVI) is a decentralized, stable, transparent, and informative indicator for volatility information of the cryptocurrency marketplace. The Crypto Volatility Index (CVI) is based on the Black Scholes option pricing method with an index ranging from 0 to 200. The Index monitors the 30-day implied volatility of Ether (ETH) and Bitcoin (BTC).
Black Scholes is a pricing model for financial instruments used in the valuation of stock options. It helps in determining the theoretical price or fair price for a call or put option which is derived from six variables namely volatility, type of option, underlying stock price, time, strike price, and the risk-free rate.
The index calculates the implied volatility of cryptocurrency option prices while analyzing the future volatility expected in the crypto market thus bringing into the crypto market the ‘market fear index’. This method tackles the challenging liquidity environment of the crypto space and assists in extracting stable market implied volatilities.
CVI uses Chainlink architecture with multiple oracles, oracles are entities that connect blockchain to the external system, that fetch required data from multiple off-chain sources and calculate it into the formulated CVI. The Decentralized network of Chainlink oracles computes the weighted average of numerous cryptocurrencies like ETH and BTC, where weights are assigned to them as per their asset market cap and thus making sure it is not just limited to the volatility index of BTC.
It is governed by GOVI token and the users holding such token can vote on matters relating to the CVI platform. GOVI holders also have the option of staking the token and collecting platform fees. Initially GOVI token was airdropped to COTI holders.
The CVI index provides a great way for finding money-making investment and trading opportunities in the market without the prediction of the movement of price in the market.
Once there is an upsurge in the market volatility users can open CVI positions using USDC, ETH, and COTI and accumulate profits. On the contrary when the market volatility is low users can earn fees from users who have open CVI positions by providing liquidity to the platform.
What does the collaboration with EPNS have in store for CVI?
To rake in profits from the CVI platform users have to constantly monitor updates received from third-party communication protocols like mail, telegram, or Twitter. Due to the volatile nature of the crypto market, the fluctuations in the prices are high and users can miss out on these opportunities.
EPNS on the other hand can send users of CVI timely decentralized push notifications, which will decrease the reliance of users on centralized notifications and allow them to take positions promptly.
Under this collaboration, effortless and direct communication will be placed between CVI and the users which will result in higher user engagement. Users will receive timely push notifications about the market situation which will encompass information and updates about arbitrage opportunities available for CVI arbitrageurs, notification about unexpected and sudden market index fluctuation, news about upcoming market events like any new listings or Coinbase IPOs or MainNet events which can affect the market index, and updates to individual users on reaching liquidation threshold with respect to their margin positions.
On receiving the following updates on a timely basis users of CVI can implement better and pre-planned strategies and make profits irrespective of the direction the crypto market is moving in. Users can maximize their gain by taking prompt positions in the event of sudden index fluctuation and capitalize on it without missing out on the opportunity to do so. The collaboration with EPNS, decentralized Push notifications will help in stimulating active participation and CVI user engagement.
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