Crypto Volatility Updates

CVI
4 min readFeb 10, 2022

Crypto assets have rebounded positively since our last update, and there appears to be increased hope and optimism despite ongoing geopolitical tensions. It has definitely been a much calmer week compared to what we have experienced so far in 2022 (which says a lot considering it’s just February). However, there is an expectation that market activity will continue to pick up as inflation, employment growth, and other market-related economic numbers are released (particularly in the US) in the coming weeks.

A few somewhat related points:

  • The Crypto Volatility Index (CVI) trended lower this week, maintaining an average value of 74.
  • After a few weeks below this value, the overall crypto marketcap is back to the $2 trillion range. A good indication that the “Crypto Winter’’ might be easing up.
  • In our last Volatility Times, we mentioned that inflation sentiments have already been priced into the markets. The US will be releasing its Consumer Price Index report in a few hours — this report will give a clearer picture of inflation and will no doubt affect upcoming monetary actions.

As the crypto markets continue to regain some stability, albeit at an unpredictable pace, investors should take some comfort in the fact that digital assets are here to stay. With more Central Banks adopting CBDCs and other digital currencies, it is expected that there will be both an increased level of structure and development necessary for the continuous growth of the crypto ecosystem. While there will undoubtedly continue to be periods of uncertainty, the overall trust of the crypto ecosystem will be improved, limiting some of the widespread panic (or FUD) that has constantly been associated with crypto investing.

Market Movements

For Bitcoin and most of the major altcoins, the path back to previous all-time highs will undoubtedly be driven by investors acting optimistically towards both global economic events and cryptocurrency’s utility (or use-case). Focusing on the economic side, the impact on crypto markets this week was positive. Bitcoin crossed over the $40,000 range and seems to be maintaining a floor of approximately $43,500. While it has trailed ETH and most major Altcoins on a 7-day basis, BTC has outperformed on a 1-month basis by about 4%.

On the other hand, ETH has seen a 17% rebound on the week and has trailed most of the other Altcoins by over 20%. It should be noted that the Altcoin sentiment is also influenced to a higher degree by future utility prospects. Against this, it will be interesting to see if the gap between BTC & Altcoins continues to tighten in the coming months.

Volatility Index

The CVI Index was a lot more stable this week. After reaching a low of 70 over the weekend (Feb 5th, 2022), a mild run-up in future volatility sentiment saw the index reaching the current week’s high of 75. As the inflation numbers get released this week, all eyes will be on both the CVI and crypto options market for a glimpse of where traders see crypto assets in the 3–6 month horizon.

Meanwhile, it was also a stable week on the ETHVI, which measures Ethereum’s future volatility sentiment. A look through the chart shows it has maintained a floor of 80 over the past few days and a considerable drop in future volatility expectations.

So far, February seems to have been better than January. However, all attention should continue to be directed towards the US Federal Reserve as they continue to indirectly express signs of upcoming monetary tightening. Regardless of their forthcoming actions, we encourage investors to utilize both the CVI & ETHVI to gauge the market’s sentiment on volatility — with these insights, they will be better prepared to act on the dynamic nature of crypto markets.

A few things we noticed this week

  • One week after launching the Treasury, COTI has seen over 265 million $COTI deposited. Learn more here.
  • Cardano has seen a huge increase in its network transactions — read more.
  • FTX’s SBF appeared on the US Senate Committee to advocate for stablecoins and cryptocurrencies — more info.

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CVI

CVI is a decentralized volatility index for the crypto space