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CME Group, the world's largest derivatives marketplace, plans to offer Bitcoin Volatility futures from 1 June, which would be the first regulated futures contracts that isolate volatility risks from price direction.
With the launch pending regulatory review, Bitcoin Volatility futures will settle to the CME CF Bitcoin Volatility Index (BVX), a 30-day forward-looking measure of implied volatility.
Rather than tracking price, the index is derived from real-time CME Bitcoin options order books to isolate market expectations.
Published every second, from 7am to 4pm US Central Time, the BVX offers "a transparent, responsive underlying for precision volatility trading," CME said in a statement.
Volatility becomes a tradable asset
The contracts allow users to trade fear independently from price. "As the digital asset complex continues to expand, Bitcoin volatility futures will be an important tool for market participants to better manage portfolio risk by directly trading volatility," said David Schlageter, Managing Director and Head of Derivatives Sales at Morgan Stanley.
The CME CF Bitcoin Reference Rate is the benchmark spot price on which regulated derivatives, Exchange Traded Funds and Exchange Traded Products are based.
"With the launch of these CFTC-regulated futures contracts, we anticipate a similar flourishing of regulated financial products that will enable investors to more precisely harness the unique characteristics of bitcoin and express views on forward-looking sentiment and manage risks that have, until now, been difficult to implement," said Sui Chung, CEO of CF Benchmarks.
CME has built up an arsenal of digital asset products that expand beyond its core business of derivatives contracts tied to interest rates, equity indexes, energy and commodities.
It has also dipped into the lucrative prediction markets space and last month offered incentives for event contract swaps to trading firms to boost its market share.
Market structure deepens
For traders, the ability to isolate volatility opens up a different set of strategies.
Instead of taking directional bets, they can hedge their options exposure or position around expected market swings. As a result, crypto derivatives may become more layered, with new instruments built around pricing, risk, and sentiment instead of spot exposure.
As these products develop, trading is likely to move beyond simple long-short positioning. The market is becoming more complex, and more familiar to participants used to traditional financial systems.