Fear and Greed: Cryptocurrency Volatility Indices

Volatility remains one of cryptocurrencies' defining features. As markets become more developed, demand for dedicated products and measures of volatility have increased. Sophisticated traders, particularly those coming from traditional markets, use volatility indices and products to hedge, as well as trade against future market changes without taking directional positions.

For example, a trader holding a portfolio of popular cryptocurrencies wants to protect themselves against future market volatility. They may choose to hedge themselves using the equivalent amount of volatility derivatives, limiting their losses due to sudden price changes by using the profits from volatility derivatives.