BVOL Update 2020-06-13


BVOL and iBVOL, the +1 and -1 Bitcoin Volatility Tokens, are ERC20 tokens that track the implied volatility of BTC based on MOVE contracts.  So far, they have been tracking the dollar-based volatility: the amount of dollars that the price of BTC is expected to move.  This has the unintuitive consequence of giving it a correlation with BTC: when bitcoin's price goes down, the dollar-based price move that 1% represents goes down.

Starting on 2020-06-17, BVOL and iBVOL will attempt to track the implied percent-based volatility of BTC.  To do so, they will keep their current MOVE portfolios; but in addition BVOL will be 1x short BTC perpetual futures, and iBVOL will be 1x long BTC perpetual futures.  This change in the basket will be reflected in the API and website when it takes effect.


To give an example of this change, say that BTC is expected to move 1% per day.  If BTC is trading at $10,000, then the daily move is $100; but if BTC falls to $9,000, the daily move is $90.  This means that if implied percent volatility doesn't change, a decrease in BTC price will lead to a decrease in BVOL price and an increase in iBVOL price. After this change, the decreased dollar-based move of BTC (from $100 to $90) will be offset by the gain in the BTC short position in BVOL (short $100 of BTC-PERP will gain $10 from BTC falling to $9,000), and so BVOL and iBVOL's price won't change.




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