What is the Ethereum Volatility Index?
The Ethereum Volatility Index is a tool measuring the volatility of the ETH/USD price, over different periods of time.
Why is it important to track volatility?
Volatility is a calculation of how much the price of an asset has moved during a specific timeframe.
Hence, high volatility comes hand-in-hand with sharp price moves (both up or down). On the other hand, low volatility is a signal of a consolidating or slowly trending market.
Investors and traders use volatility to gauge the risk of a potential asset. The general rule of thumb is that extremely volatile assets are risky, while less volatile assets are less so.
In traditional markets, the most popular volatility index is the VIX, which measures expected volatility of the S&P500.
How is Ethereum’s volatility calculated?
Our ETH volatility index calculates volatility based on the standard deviation of the daily ETH/USD daily open price, for the past 30 days.
This is widely seen as one of the most robust methods for calculating an asset’s volatility, when only using past historical data.
That said, a substantially more accurate approach would be using the “Implied Volatility”, which is a byproduct of options trading. However, for the IV reading to be significant, crypto options exchanges still have to become more liquid.
What is the data source of this volatility index?
Our volatility data is sourced from CoinMetrics, an institutional cryptocurrency markets data provider.
Do you track any other cryptocurrencies?
Yes, we also have an Bitcoin volatility index.