COTI, a corporate fintech platform, has developed a decentralized cryptocurrency market volatility index (cVIX) to help investors assess industry risks.
CVIX works by calculating a decentralized price-based volatility index options for cryptocurrencies and uses the Chainlink oracle network as a source of necessary financial data. CVIX is similar to the VIX - the Chicago Mercantile Exchange's (CBOE) Volatility Index, a popular measure of stock market volatility expectations based on S&P 500 options. Such indices are sometimes called "fear indices" because they reflect market fears about an underlying asset. Initially, the cVIX Index will support trades and deposits in ETH and USDT, with more crypto assets to be added soon. Traders can hedge against potential increases in market volatility by going long on the cVIX. Likewise, traders who are prepared for a spike in volatility through option strategies can hedge against market stagnation or periods of low volatility by going short on CVIX.
The cVIX margins can be seen as opposite indicators. In traditional markets, bull rallies often end in record lows on the VIX. “CVIX can be used by liquidity providers who play the role of an insurance company and earn commissions. In the event that a trader buys a long or short position on cVIX and their expectations are not met, liquidity providers must recoup the lost profits, ”according to a COTI press release.
As a reminder, last year the Cardano Foundation and COTI announced the launch of the AdaPay solution, which will allow online marketplaces and stores to receive payments in ADA cryptocurrency.