For most people, trading cryptocurrencies like bitcoin It comes down to a simple question: Will prices go up or down?
But there is another dimension to trading, which is volatility, a measure of how volatile prices could be regardless of direction. It is already a very popular operation in the stock markets and now CME wants to bring it to bitcoin.
The world’s leading derivatives exchange announced this week its plan to debut Bitcoin volatility futures on June 1, pending regulatory approval.
Unlike traditional bitcoin futures, the new contracts will not directly track the price of the cryptocurrency. Instead, they will refer to the CME CF Bitcoin Volatility Index (BVX), which represents the market expectations for Bitcoin volatility over the next 4 weeks.
In simple terms, traders will be able to bet on whether bitcoin markets are about to become more chaotic or more stable, without necessarily taking into account whether prices themselves are rising or falling.
“Cryptocurrency market participants are looking for regulated products that provide opportunities to gain exposure to digital assets when markets move,” Giovanni Vicioso, global head of cryptocurrency products at CME Group, said in the press release. “With our new Bitcoin volatility futures, traders will be able to invest in or hedge against future Bitcoin volatility, allowing them to access a critical new layer of risk management.
Note that offshore exchanges like Deribit offer futures tied to their own bitcoin volatility indices, but these volatility markets remain relatively small and out of reach for most US institutions to participate. Additionally, the domestic crypto market still lacks a mature CME-style bitcoin volatility futures product, so volatility exposure and hedging is primarily achieved through options and other synthetic structures.
CME’s latest offering will expand the exchange’s existing product suite, which includes bitcoin futures and options. Futures went live in December 2017 and have since become the instrument of choice for institutions seeking directional exposure and arbitrage opportunities. They have generated billions in trading volume and open interest, even surpassing offshore giant Binance at one point last year.
This trend of bitcoin institutionalization accelerated with the debut of 11 spot-traded bitcoin ETFs in January 2024, and the subsequent debut and rapid rise in popularity of options linked to BlackRock’s IBIT.
Therefore, CME volatility futures seem like a logical next step, helping institutions manage risk beyond price direction to volatility itself, according to Sam Gaer, chief investment officer of Monarq Asset Management’s Directional Fund.
“IBIT options open interest outpacing Deribit is a clear sign of institutional demand, and vol futures are the natural next step,” Gaer told CoinDesk in a Telegram message.
Gaer pointed to the way volatility trading evolved in traditional markets, noting that the CBOE volatility index, VIX, also known as the fear indicator, did not become a deeply liquid asset class on its own. Instead, liquidity accelerated only after exchange-traded funds and broader structured products built around VIX futures created a self-reinforcing ecosystem.
In other words, the growth of volatility trading was driven by derivatives linked to the VIX spot index. Once those products existed, volume attracted more volume, eventually turning volatility into an independent market in its own right.
“VIX futures didn’t reach escape velocity until the ETF ecosystem developed around futures (not the spot index, in particular), and the same flywheel dynamic applies here. Volume begets volume. If CME’s product construction and composition are clearly defined and easily disseminated, this has the potential to be a watershed moment for Bitcoin volatility as an asset class,” Gaer said.
