How Does Implied Volatility in Options Differ from Historical Volatility in Cryptocurrency Prices?
Historical volatility measures the actual price fluctuations of a cryptocurrency over a past period. Implied volatility (IV) is a forward-looking measure derived from the market price of an option contract.
IV represents the market's expectation of how volatile the asset's price will be in the future. Miners often look at historical volatility for risk assessment but use IV to gauge the cost and value of hedging strategies.
Glossar
Historical Volatility
Evidence ⎊ This metric is derived from the time-series of past asset prices, representing the actual realized dispersion of returns over a defined historical window.
Implied Volatility
Expectation ⎊ This value represents the market's consensus forecast of future asset price fluctuation, derived by reversing option pricing models using current market premiums.