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#The Crypto Volatility Index (CVI) is a decentralized VIX for crypto that allows users to hedge themselves against market volatility and impermanent loss.

Decentralized finance, or DeFi, one of the largest industries in the cryptocurrency space, surged to more than $150 billion in May 2021. Volatility trading is set to be the next big development for DeFi, ultimately giving traders one more way to profit from the cryptocurrency market’s volatile nature.

With this in mind, active traders, hedge fund managers, and institutional investors now require tools to track the volatility of the cryptocurrency market. Experienced traders will otherwise continue to use riskier strategies like long straddles and strangles.

On the other hand, the emergence of the derivative market has signaled the need for solid pricing strategies as well as reliable risk measures. There is a growing need for a new decentralized volatility index that provides a proper estimation of the risk measurement of the cryptocurrency components, and a delivery of market status information to potential investors.

As such, we believe the crypto market needs a volatility index that is decentralized and dynamic, unbiased, and not connected to any exchange.

Today, we announce exactly that, CVI, a revolutionary and first of its kind decentralized VIX for the crypto market so that traders can hedge themselves against volatility or lack thereof.

CVI is a full-scale decentralized platform that brings the sophisticated and very popular “market fear index” to the crypto market and is created by computing a decentralized volatility index from cryptocurrency option prices, together with analyzing the market’s expectation of future volatility. We believe that CVI provides the most reliable DeFi tool suitable for analyzing volatility, hedging portfolios and earning from being a liquidity provider.

#The CVI index is a VIX for crypto.

CVI is an innovative, decentralized, stable, transparent, informative, and replicable benchmark for cryptocurrency volatility information.

The index was created by the COTI team that has partnered with Prof. Dan Galai, the creator of the original VIX, in order to create a “market fear index” for the crypto market.

The index tracks the 30-day implied volatility of Bitcoin and Ethereum. The index ranges between 0 and 200 and is produced based on a Black-Scholes option pricing model, which computes the implied volatility of cryptocurrency option prices together with analyzing the market’s expectation of future volatility.

#CVI Ecosystem Overview

For CVI to be popular and widely adopted, there should be an instrument (system) allowing traders to easily open positions against the index and trade it. Therefore, as part of the CVI launch, COTI will also introduce an innovative and full-scale decentralized ecosystem that includes; The CVI trading platform, Volatility tokens, and the $GOVI token.

#CVI Platform

A user-friendly and decentralized platform that allows users to actually trade the CVI index according to their belief in the market.

In our efforts to create a full-scale decentralized ecosystem, along with developing the CVI Index, we created a user-friendly platform allowing users to trade the index directly and hedge themselves to market volatility or lack thereof.

The liquidity provided is utilized by the CVI AMM (Automated market marker), which sells volatility according to the index value, it is in essence the other side of every trade done by traders.

The AMM takes into account the market demand for volatility in a given moment, as well as risk management metrics of the liquidity providers.

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#The AMM pricing mechanism:

The AMM takes into account the demand for volatility at any given moment. The calculation works as follows: We maintain two adjusted volume timestamps, one for deriving open position fees and the other for close position fees. Each of these timestamps always lies within a corresponding time window prior to the current block timestamp.

At the moment, both time windows for the open and close position are set to 2 hours. Every open position event triggers an adjustment of the corresponding