For most people trade cryptocurrencies like bitcoin boils down to a simple question: Will prices go up or down?
But there is another dimension to trading, which is volatility, a measure of how volatile prices can be regardless of direction. It’s already a hugely popular trade in the stock markets, and now CME will bring it to bitcoin.
The world’s leading derivatives marketplace announced this week its plan to debut Bitcoin volatility futures on June 1, pending regulatory approval.
Unlike traditional bitcoin futures, the new contracts will not track the cryptocurrency’s price directly. Instead, they will refer to the CME CF Bitcoin Volatility Index (BVX), which represents the market’s expectations for bitcoin volatility over the next 4 weeks.
Simply put, traders will be able to bet on whether bitcoin markets are becoming more chaotic or more stable, without necessarily deciding whether prices themselves are heading higher or lower.
“Crypto market participants are looking for regulated products that provide opportunities to gain exposure to digital assets when markets move,” said Giovanni Vicioso, global head of cryptocurrency products at CME Group, in the press release. “With our new Bitcoin volatility futures, traders will be able to invest or hedge bitcoin’s future volatility, giving them access to a critical new layer of risk management.
Note that offshore exchanges such as Deribit offer futures tied to their own bitcoin volatility indices, but these volatility markets remain relatively small and beyond the scope of participation for most US institutions. Furthermore, the onshore crypto market still lacks a mature, CME-style bitcoin volatility futures product, so volatility exposure and hedging is achieved primarily through options and other synthetic structures.
CME’s latest offering will expand the exchange’s existing product suite, which includes bitcoin futures and options. Futures went live in December 2017 and have since become the instrument of choice for institutions seeking directional exposure and arbitrage opportunities. They have generated billions in trading volume and open interest, even surpassing offshore giant Binance at one point last year.
This trend of bitcoin institutionalization accelerated with the debut of 11 spot-listed bitcoin ETFs in January 2024, and the subsequent debut and rapid rise in popularity of options linked to BlackRock’s IBIT.
So CME’s volatility futures appear to be the next logical step to help institutions manage risk beyond price direction to volatility itself, according to Sam Gaer, chief investment officer of Monarq Asset Management’s Directional Fund.
“IBIT options open interest exceeding Deribit is a clear signal of institutional demand, and volume futures are the natural next step,” Gaer told CoinDesk in a Telegram announcement.
Pointing to the way volatility trading evolved in traditional markets, Gaer noted that the CBOE Volatility Index, VIX, also known as the fear gauge, did not become a deeply liquid asset class on its own. Instead, liquidity accelerated only after exchange-traded funds and broader structured products built around VIX futures created a self-reinforcing ecosystem.
In other words, the growth in volatility trading was driven by derivatives linked to the spot VIX index. Once these products existed, volume attracted more volume, eventually turning volatility into a market in its own right.
“VIX futures didn’t reach escape velocity until the ETF ecosystem developed around futures (not the spot index, especially), and the same flywheel dynamic applies here. Volume begets volume. If CME’s product construction and composition is clearly defined and easily propagated, this has the potential to be a watershed moment for Bitcoin volatility as an asset class,” Gaer.
