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Markets unpredictable? Trade volatility.

· 3 min read
cvi launch

This is huge.

We just shipped a CVI market. Now you can long and short volatility itself.

The CVI, or Crypto Volatility Index, tracks the volatility of crypto markets. Lots of price movement = index go up. Price stagnation = index go down.

In Float Capital, a long position would appreciate from increased volatility in the markets, and shorts would appreciate from decreasing volatility.

But more than just minting a position to try and predict volatility, the CVI can add a lot of value to a DeFi portfolio. Here’s how.

Building strats around CVI#

There are some power ways you can build CVI exposure into your DeFi strat.

Say you’re sitting on a whole bunch of staked positions, or just have a big holding of volatile assets, and you’re worried about a big price drop or bear market.

You could open a long on the CVI. Price drops = more volatility, which means a long position benefits.

Or say you’re day trading ETH in our 3x leveraged ETH market. To get real value out of day trading, you’re gonna need a lot of volatility.

An advanced degen could hedge their day trading chaos by shorting CVI, so that if the markets don’t have much movement, they can still potentially have a winning position.

Now let’s say you’re running a delta neutral strat in our OHM, AXS or JOE market. You’re effectively covered against price volatility, but you’re worried that you’re going to miss out on a big bull run.

Boom. Long CVI.

Reduced risk delta neutral rewards roll in, and your long CVI position gets big and green when the price moves.

Not bad, hey?

Big opportunities for CVI arbitrage#

Our CVI market isn’t the first such market on-chain.

Credit for building this on-chain index goes to the team at CVI / COTI.

They identified the need for an on-chain volatility index, and helped Chainlink build the CVI price feed that powers our market.

Originally they were the only platform on-chain that allowed for CVI exposure. Now we have one too.

That’s a good thing for everyone.

Institutional investors, the big dogs, with fat stacks of cash, like having multiple options.

Multiple CVI markets will help investors go delta neutral on the market, offsetting long exposure in one protocol with short exposure in another, allowing for reduced risk mining of rewards and incentives.

The CVI is the blockchain equivalent of one of TradFi’s most degen indexes, the VIX.

The index draws on data from mainstream exchanges, using the prices from 30 day options.

These options create an index that tracks the perceived volatility of the crypto markets in the near future.

This piece is not financial advice. Any kind of DeFi activity comes with risk, and should only be attempted by serious degens who understand this and know how to navigate it.

To mint a position in our CVI market go here.

To learn more about the risks inherent with using Float, read our blog post here.

To understand how the protocol and our magic internet assets work, read our docs.

If you want to meet the team behind Float Capital, claim your gem role, or hang out, come to our Discord.

This piece was written by Campbell Easton, Jon Jon Clark and Denham Preen.