Recently, Cboe announced plans to list futures contracts on bitcoin which is still in the works pending regulatory review. Since that announcement I’ve been paying much more attention to the crypto currency space and even spent time with an 8th
grader in my neighborhood who is mining ethereum. In watercooler discussions at Cboe (which take place in our coffee shop), we were discussing the volatility of bitcoin and one smart guy said it was probably similar to VIX. That statement got me crunching numbers with one result being the chart below.
I calculated the rolling 30 trading day realized volatility for both bitcoin and VIX. It turns out they are pretty darn similar. Both have had pretty wide ranges with the bitcoin low at 32% and high around 120% and the VIX low at 44% and high of 133%. The most startling thing to people around Cboe is that realized 30-day volatility for VIX has been higher than that of bitcoin in 2017, 85% for VIX and 76% for bitcoin. As much press as the big moves in bitcoin has gotten combined with the focus of VIX being so low in 2017 would make one think the numbers aren’t accurate (they are, I double checked).
Finally, I did a little historical work and calculated the average bitcoin and VIX 30 day realized volatility by year over the last five years. The more volatile instrument changes by year with bitcoin higher is 2013 and 2014, but VIX having higher realized volatility in 2015, 2016, and of course in 2017.
Traders love volatility, it creates opportunities. VIX has grown tremendously as a tradable asset since the futures were introduced in 2004. Bitcoin futures are planned at the Cboe Futures Exchange, again pending regulatory review. To learn more about that you can visit http://cfe.cboe.com/cfe-products/cboe-bitcoin-(usd)-futures and of course check in here for more thoughts about this developing market.