FTX Exchange Releases Tokens for Speculating on Bitcoin's Implied Volatility

Key highlights:

• Crypto derivatives exchange continues introducing innovative products for crypto speculators
• FTX has launched two tokens that allow traders to make bets on Bitcoin's implied volatility
• Like "leveraged tokens", these products seem to be geared towards advanced traders

Cryptocurrency derivatives exchange FTX has launched two tokens that seek to provide investors exposure to the implied volatility of the Bitcoin market. Implied volatility refers to the market’s forecast for the future volatility of an asset’s price.

The exchange has released two tokens: BVOL and iBVOL. BVOL is aimed at traders who want to go long on the implied volatility of BTC, while iBVOL is aimed at traders who want to go short. A simple explanation provided by FTX reads:

»Sometimes, you might not have an opinion on whether BTC is going to go up or down, but might have an opinion on how much it will move.  If you think that markets are going to be more volatile than expectations, you could buy BVOL ; if you think they're going to be less volatile than expectations, you could buy iBVOL.«

The tokens function as ERC-20 standard tokens on the Ethereum blockchain. This means that they are not limited to the FTX exchange – users can custody the tokens themselves or transfer them to other exchanges that decide to list them. 

Betting on Bitcoin volatility

The token’s price action is tied to FTX’s MOVE contracts, which track the absolute value of the  movement of the price assets. For example, a daily BTC-MOVE contract tracks the absolute dollar value of the movement in Bitcoin’s price in a day. Traders can go long on these contracts if they expect a big movement in the asset’s price, or go short if they expect the price to be relatively stable.

Compared to trading the MOVE contracts, the new tokens offer a more convenient proposition to traders:

»You can buy BVOL tokens just like normal ERC20 tokens on a spot market.  No need to manage collateral, you just spend $10,000 on BVOL or iBVOL and have a token.«

However, the product, just like FTX’s leveraged tokens, might be more suitable for advanced traders.

Leading cryptocurrency exchange Binance listed a range of FTX’s BULL and BEAR tokens in January of 2020, but delisted all of the leveraged tokens from its exchange on March 18, saying that many users displayed a lack of understanding of how these instruments worked.