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CME Group Plans to Let Traders Bet Not Only on Bitcoin’s Price but Also on Its Volatility
For most people, trading cryptocurrencies such as Bitcoin comes down to a simple question: will prices go up or down?
However, there is another side to trading — volatility, which measures how dramatically prices can fluctuate regardless of direction. Volatility trading is already extremely popular in traditional financial markets, and CME now aims to bring this concept to Bitcoin.
This week, the world’s leading derivatives marketplace announced plans to launch Bitcoin volatility futures on June 1, pending regulatory approval.
Unlike traditional Bitcoin futures, the new contracts will not directly track the cryptocurrency’s price. Instead, they will reference the CME CF Bitcoin Volatility Index (BVX), which reflects market expectations for Bitcoin volatility over the next four weeks.
In simple terms, traders will be able to bet on whether Bitcoin markets will become more chaotic or more stable, without necessarily taking a position on whether prices themselves will rise or fall.
“Participants in the cryptocurrency market are seeking regulated products that provide opportunities to gain exposure to digital assets during periods of market movement,” said Giovanni Vicioso, Global Head of Cryptocurrency Products at CME Group, in a press release. “With our new Bitcoin volatility futures, traders will be able to invest in or hedge future volatility, giving them access to a new and critically important layer of risk management.”
It is worth noting that offshore exchanges such as Deribit already offer futures tied to their own Bitcoin volatility indices. However, these volatility markets remain relatively small and largely inaccessible to most U.S. institutional investors. Moreover, the domestic crypto market still lacks a mature CME-style Bitcoin volatility futures product, meaning that hedging and volatility exposure have primarily been achieved through options and other synthetic structures.
CME’s latest offering will expand the exchange’s existing suite of cryptocurrency products, which already includes Bitcoin futures and options. Bitcoin futures were first launched in December 2017 and have since become a preferred instrument for institutional investors seeking directional exposure and arbitrage opportunities. The contracts have generated billions of dollars in trading volume and open interest, even surpassing offshore giant Binance at one point last year.
The institutionalization of Bitcoin accelerated following the launch of 11 spot Bitcoin ETFs in January 2024, along with the rapid growth in popularity of options linked to BlackRock’s IBIT fund.
“Bitcoin volatility futures from CME appear to be the next logical step in helping institutional investors manage risk beyond simple price movement and into volatility itself,” said Sam Gaer, Chief Investment Officer of Monarq Asset Management’s Directional Fund. “The fact that IBIT options open interest has surpassed Deribit is a clear signal of institutional demand, and volatility futures are the natural next phase.”
Gaer also pointed to the historical development of volatility trading in traditional markets, noting that the CBOE Volatility Index (VIX), commonly known as the “fear index,” did not immediately become a standalone highly liquid asset class. Liquidity only accelerated after ETFs and broader structured products built around VIX futures created a self-sustaining ecosystem.
In other words, the growth of volatility trading was driven by derivatives linked to the spot VIX index. Once these products emerged, trading volumes began generating even greater volumes, eventually turning volatility into an independent market of its own.
“VIX futures only reached escape velocity after an ETF ecosystem formed around the futures themselves rather than the spot index, and the same principle applies here: volume creates volume. If CME’s product structure is clearly defined and easily distributed, this could become a turning point for Bitcoin volatility as a standalone asset class,” Gaer concluded.
See also: "Morgan Stanley’s Bitcoin ETF Completes First Month Without a Single Outflow"
