The Crypto Volatility Index (CVI) is a decentralized protocol that aims to provide a forecast of future volatility in the crypto markets. The CVI assists crypto traders in assessing the volatility of the crypto markets and then placing trades to hedge their positions or make short-term profits. The CVI can be regarded as a benchmark that provides an insight into the true sentiment of future volatility expressed largely from the intraday fluctuations of the crypto market.
“Wall Street traders have the VIX, while crypto traders have the CVI…”
On January 1993, the Chicago Board Options Exchange (CBOE) launched the VIX as an index to track the volatility of the S&P 500. The impact of the VIX on the global financial markets cannot be overstated. In the years following its official launch, new financial products like VIX-linked ETFs and ETNs were created to provide traders with a quick and easy way to express their volatility sentiment based on the VIX. The VIX was created based on the research papers authored and published by Professor Dan Galai, who has been recognized academically for his work in options and risk management. Professor Galai also works with the CVI team as a Senior Researcher and helped build the CVI.
At its core, the CVI is a platform that allows crypto traders to:
- Track future volatility sentiment in the crypto markets
- Hedge and create short-term trades based on this information using volatility tokens like the CVOL
$GOVI and $CVOL are two tokens that each of them play a role in the CVI ecosystem. They have very different use cases, and while they are both related to the CVI platform, the utility driving both tokens is very different. Let’s dive into these differences below.
The Crypto Volatility Token (CVOL)
Similar to VIX ETFs, CVOL is a token that tracks the intraday movement of the CVI. The CVOL token aims to allow market participants to instantly gain exposure to crypto volatility and without additional costs. Unlike the traditional ETFs, the CVOL token is decentralized, permissionless, and can be traded 24/7. The CVOL’s use case is primarily its effectiveness at tracking the crypto volatility index, thereby equipping investors with a mechanism to execute their sentiment on future volatility into action.
Let’s take a look at a brief example:
- On May 8th, 2022, the CVI crossed the 70 mark after a few weeks below this level.
- Following all the uncertainties in the broader economic markets, a trader looking at this value could have come to the conclusion that crypto volatility will be heightened in the immediate term.
- If this trader wanted to put action or “real money” behind this sentiment, he or she could have placed a trade to purchase CVOL on either QuickSwap or the CVI platform.
- Placing this trade on May 8th when the CVI (and CVOL) was at 70 and then redeeming the position at its peak of 128 a few days later on May 12th, would have led to an 80% profit in the span of just 4 days.
- So if the trader placed an order for $1,000 worth of CVOL on May 8th, this value would have increased to $1,800 and a profit of $800 (excluding fees) in the span of a few days.
The CVOL is an elastic token that provides instant access to certain fluctuations in the crypto market volatility. It is a tool that provides traders with an opportunity to express their short-term or immediate market sentiment on the direction of the crypto markets. It is important to note that the CVOL token was not designed as a buy/hold investment. With the CVOL token, crypto traders are able to transact seamlessly and create multiple crypto investment solutions that fit their narrative and execution, based on movements of the CVI.
The $GOVI Token
The CVI is a secure and permissionless infrastructure built on the Ethereum blockchain. As a decentralized protocol, the CVI provides an opportunity for its community members to share some of the benefits and growth of the platform through staking rewards, governance voting, and lots more.
As a decentralized ecosystem, GOVI token holders have the opportunity to do the following:
- $GOVI holders participate in the platform fees allocation i.e. a portion of each transaction fee paid by CVI platform users is distributed to $GOVI holders;
- Express their opinions on the CVI platform by voting on (GOVI DAO) proposals that include leverage amounts, tradeable assets, and more;
- Earn rewards through staking their $GOVI tokens;
- Receive $GOVI yields from platform fees.
Unlike the CVOL token, GOVI can be viewed as a utility token given the residual benefits that CVI community members receive from holding the token. Just a few months ago, the CVI surpassed over $1M in accumulated fees earned and distributed to GOVI stakers. As the CVI continues to be utilized across a growing list of traditional, institutional, and infrastructural projects, there will be an increase in the number of activities on the platform leading to an increase in the ability of $GOVI holders to be rewarded.
In closing, it is important to highlight that traders can use the CVOL token to express their short-term volatility outlook of the crypto markets. For the investing audience, holding the GOVI token will credit them the proportional share of the CVI’s long-term revenues and the future growth of the CVI ecosystem.
Cryptocurrencies trading and the CVI ecosystem are considered to be high risk of losing funds and are subject to market risks and volatility. Past performance does not necessarily indicative of future performance. You should obtain expert professional advice with regard to specific legal, tax and financial implications of the investment/participation in cryptocurrencies trading or in the CVI ecosystem. This publication is for your information only and is not intended as an offer, or a solicitation of an offer, to buy or sell any investment or other specific product.
For all of our updates and to join the conversation, be sure to check out CVI channels:
Telegram (group): https://t.me/cviofficial
Telegram (channel): https://t.me/cvichannel