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Solana’s SOL Gains First Implied Volatility Index: What It Means for Traders
Volmex Finance has introduced the first implied volatility index for Solana’s SOL token. The crypto derivatives protocol revealed its new innovation on Tuesday, as a way to measure the expected price fluctuations of the world’s fifth-largest cryptocurrency in terms of market value.
For traders, this new index, the Solana Volatility Implied Volatility Index (SVIV), ushers in a new era of assessing and interacting with the market.
Understanding the SVIV Index
The SVIV index is built in a way that measures the expected volatility for Solana’s SOL token for the next 14 days. According to the official announcement from Volmex Finance, traders will be able to use this index to track potential price swings, both upward and downward, for no more than the next two weeks.
The SVIV index, which is poised to provide precisioned insights into SOL’s volatility, will come in handy for investors and traders looking to find their way in the often confusing cryptocurrency markets.
As it were, volatility, in financial terms, often refers to the degree of price variation over a specific period of time. While high volatility means that the price of an asset can change significantly over a short period in either direction, low volatility suggests more stable prices over time.
So, with Volmex’s SVIV index tool, market participants now have a clearer idea of their next steps. That is, they are almost certain of the potential risks and rewards that can come with trading SOL at every point in time.
Meanwhile, Volmex Finance has also hinted that there is more where this new idea came from. The firm announced that it would eventually come up with longer-duration SOL implied volatility indices. The plans will include the widely-tracked 30-day gauge. Furthermore, the company says it will also introduce derivatives linked to these indices later on. This is so that market participants can bet on the anticipated volatility of SOL.
Expected Impact
Without a doubt, the introduction of the SVIV index is poised to have a direct impact on how SOL is traded. The so-called “volatility trading” or “vol trading” gives traders the opportunity to also profit from the extent of price fluctuations rather than just from price movements.
Traders use various financial instruments, such as options and futures, that are tied to underlying assets and volatility indices to bet on or hedge against market volatility. Ultimately, the new SVIV index provides a deeper level of insight for traders, helping them make more rational decisions when dealing in SOL.
Meanwhile, it might be worth noting that this is not Volmex’s first attempt in the area of crypto volatility indices. Perpetual futures tied to Volmex’s Bitcoin implied volatility index (BVIV) and the Ether index (EVIV) have been trading on Bitfinex since early April. These indices, which measure the 30-day expected volatility of Bitcoin and Ethereum, have gained the attention of several institutions. So, it might be safe to say that the growing institutional adoption is further proof that volatility might be a key metric in crypto trading.
Solana’s SOL Gains First Implied Volatility Index: What It Means for Traders
