BitMEX says that it is going to bring in its own take on the VIX, a popular index measuring market volatility, on the 5th of January. Thus, Bitcoin derivatives exchange BitMEX is willing to move ahead and help traders and investors have some understanding about the volatility in the Bitcoin market and make decisions accordingly.
BitMEX says that its new index is the ‘30-Day Bitcoin Historic Volatility Index’ and according to it the index will perform a similar role, allowing traders to determine the volatility of Bitcoin. Informing the media, a source from BitMEX says that the index’s value is determined by taking trading platform Bitfinex’s XBT/USD price.
It says that it will also use the data to calculate Bitcoin’s annualized volatility wherein it will use its variation in value over the span of a year – over a 30 day period. Nonetheless, it is going to give tough competition to the VIX which is often called the “fear index” or the “fear gauge”, as it can be used to judge the market’s expectation of its trading price in the next 30 days.
According to the source from BitMEX, the company plans to allow its users to trade the index on its website. Also, here investors will be able to speculate on the BTC/USD value rising or falling by using a futures contract that gives them the option to buy or sell Bitcoin at a set price in the future. Thus, the entire purpose of the index is to help traders have an understanding of market.
BitMEX Caters Customers Who Need Liquidity
Nevertheless, BitMEX CEO Arthur Hayes explained the modus operandi of the index and said, “Say an event is coming up that you believe the price will either spike or drop, you can buy the contract and make a profit no matter what happens.” He further added, “It will give a glimpse into where market participants see the volatility realizing in the future.”
Talking further he says that BitMEX caters to investors who seek liquidity and the ability to hedge Bitcoin exchange risk. Also, as BitMEX claims to be the only Bitcoin derivatives exchange that provides an insurance service that protects traders against bankruptcy, a lot of traders would prefer to open trading account with it for assurance.
Nonetheless, the insurance is funded by a fee paid on open positions. Like insurance, the company also offers an API allowing traders to use its data with their own software tools. Releasing an open-source market making bot in August 2014 which uses the API and places both buy and sell orders, it permits traders to make money when the spread is wide enough.
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