What Does a High Reading on the DVOL Index Typically Indicate?
A high reading on the DVOL (Deribit Volatility Index) indicates that the market is pricing in a high expectation of future price volatility for the underlying crypto asset (e.g. Bitcoin) over the next 30 days.
This typically suggests market fear and uncertainty, as traders are willing to pay high premiums for protective options. High DVOL often correlates with sharp market downturns or periods of high uncertainty.
Glossar
DVOL
Volatility ⎊ Implied Volatility of Options (DVOL) within cryptocurrency markets represents a forward-looking expectation of price fluctuations derived from options pricing models, typically the Black-Scholes framework adapted for digital assets.
Dvol Index
Volatility ⎊ The Dvol Index serves as a benchmark for measuring the implied volatility of a specific digital asset, such as Bitcoin or Ethereum.
Market Fear
Indicator ⎊ Market Fear, in a quantitative finance context, is a state of collective investor anxiety often measured by a significant surge in the implied volatility of options contracts.