Crypto volatility index (DVOL)

Implied volatility is the level of future price swings that option prices imply. A volatility index aggregates it across many strikes into one number, annualised. DVOL, published by the options exchange Deribit, is the best known for bitcoin and ether and follows a methodology similar to the VIX for the S&P 500. Other providers publish comparable indices.

Traders watch these indices to gauge how much movement the options market expects. A spike usually comes with sharp selloffs or ahead of major events, such as macro data, ETF decisions or network upgrades, while very low readings indicate complacency and are sometimes followed by large moves. Options traders use the level to judge whether options are cheap or expensive.

An index reading is an expectation, not a forecast of direction, and it reflects only the options venues it draws from. Crypto implied volatility is structurally far higher than that of stock indices, so a level that would mean panic for the VIX can be routine for bitcoin.