Bitfinex Derivatives, the derivatives platform of the digital asset exchange Bitfinex, has broadened its trading portfolio with the introduction of unique perpetual futures contracts. These contracts are designed to provide investors with a tool to speculate on the volatility of Bitcoin (BTC) and Ethereum (ETH), which are the two leading cryptocurrencies by market capitalization. The products are linked to volatility indices from Volmex Finance that reflect the anticipated market volatility over the next 30 days, drawing inspiration from the VIX index known as Wall Street’s fear gauge.
Investing in Cryptocurrency Volatility
The newly launched perpetual futures, denoted as BVIVF0:USTFO for Bitcoin and EVIVFO:USDTFO for Ethereum, are margined and settled in Tether (USDT), the market’s most prominent stablecoin. Unlike traditional futures, these contracts do not have a set expiration date, allowing traders to maintain positions for as long as they wish. The contracts are designed to track the level of volatility, offering investors the flexibility to bet on the magnitude and direction of price swings of the underlying cryptocurrencies.
These investment vehicles are tailored for traders who wish to hedge or speculate amid market events anticipated to affect volatility, such as policy updates from the Federal Reserve, important economic indicators from the United States, or events specific to the cryptocurrency industry.
Perpetual futures feature a funding rate that ensures the contract price is tethered to the actual volatility index, thus mirroring the market’s expected price fluctuations more accurately.
Expanding Trading Options in the Crypto Space
With this initiative, Bitfinex Derivatives joins a growing list of cryptocurrency exchanges venturing into volatility-focused trading options. Its approach comes on the heels of exchanges like Deribit, which previously launched similar contracts tied to Bitcoin’s volatility index. This expansion in trading products allows both private and institutional investors greater versatility in their trading strategies, capitalizing on the cryptocurrency market’s intrinsic volatility.
Notes for the User
- Perpetual futures contracts on Bitfinex Derivatives enable speculation on Bitcoin and Ethereum’s future volatility.
- Contracts are margined and settled in Tether, providing a stable valuation benchmark.
- The products cater to investors looking to trade on anticipated volatility-triggering events.
In essence, the availability of volatility-focused trading instruments like perpetual futures contracts presents a novel approach for market participants to hedge risks or pursue profits within the characteristically volatile cryptocurrency market.