The Bitcoin Volatility Index


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What is the Bitcoin Volatility Index?

The Bitcoin Volatility Index is a tool to calculate the volatility of the BTC/USD price, over different periods of time.

Why is it important to track volatility?

Volatility measures how much the price of an asset has moved during a particular timeframe.

Hence, during sharp price moves in either direction, volatility tends to spike. On the other hand, if price stalls or only trends slowly in a particular direction, volatility tends to cool down.

Many investors and traders see volatility as a proxy for price uncertainty and risk.

How is Bitcoin’s volatility calculated?

Our index uses the standard deviation of the daily Bitcoin opening price the past 30 days. This is widely seen as one of the most accuarte approaches to calculating the volatility of an asset, based on past pricing data.

In the future, as Bitcoin Options exchanges continue to mature, we will be able to also include the implied volatility (IV) in our calculations.

What does Bitcoin’s volatility tell us?

Bitcoin aims to be a store of value, and eventually, a currency. In both cases, BTC’s volatility needs to be low, ideally similar to assets like Gold.

While it’s true that Bitcoin’s volatility is still nowhere near of other stores of value, we can clearly see that its volatility has been steadily trending down, ever since its inception.

Bitcoin supporters believe that, as Bitcoin’s market capitalization continues to grow, volatility will continue trending lower as the market becomes more robust. This would make BTC a stable store of value once day.

To this point, the Bitcoin volatility index seems to support that argument.

What is the data source of this volatility index?

All volatility data is sourced from CoinMetrics. CoinMetrics is an institutional cryptocurrency data provider.

Do you track any other cryptocurrencies?

Yes, we also have an Ethereum volatility index.

pascal thellmann

Pascal Thellmann is an algorithmic trader mostly focused on market making. You can get in touch with Pascal on LinkedIn or Twitter.


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