What Is a “Volatility Index” and How Does It Relate to Market Congestion?
A volatility index (like the VIX in traditional finance) is a measure of the market's expectation of future volatility, often derived from options prices. While not directly related to network congestion, market congestion (panic selling/buying) often coincides with high market volatility.
High volatility drives up option premiums, which the index tracks. Network congestion may exacerbate this by delaying trades and increasing uncertainty.
Glossar
Volatility Index
Measurement ⎊ The Volatility Index, within cryptocurrency derivatives, functions as a forward-looking gauge of market expectations for near-term price fluctuations, derived from options pricing.
Network Congestion
Latency ⎊ Network congestion within cryptocurrency, options trading, and financial derivatives manifests as increased latency, directly impacting execution speeds and potentially leading to adverse selection against slower participants.
Market Congestion
Impedance ⎊ Market congestion in cryptocurrency derivatives manifests as a temporary impedance to order execution, stemming from imbalances between buy and sell pressure concentrated within specific price levels or contract expirations.