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LedgerX, the cryptocurrency company behind one of the bitcoin derivatives markets in the United States, has announced a new index to keep track of bitcoin price swings, said CEO Paul Chou The block in an interview
The so-called volatility index of LedgerX (LXVX) will provide an indicator for investors in the bitcoin and informatic bitcoin markets to inform their trading decisions. The index will draw its data from the LedgerX options market, Chou said in an interview.
"A volatility index for bitcoins was part of the original business plan dating back five years," he said on the phone. "Once we got a market where we were comfortable, we decided to launch."
Chou said the index will show how much bitcoin can move up or down in the next month, which shows the degree to which a trader could lose or make money with his crypto-bet. This could be useful for current crypto-investors and for institutional companies looking to enter the market. "Many of us worked with Goldman Sachs and used these types of indices to understand how risky our books are," he said.
Despite the recent turmoil in US equity markets, Chou says the index indicates that bitcoin is three times more volatile than shares.
"I think that those big, extreme falls followed by climbs will go up the overtime moderates," said Chou. However, the current volatility of bitcoins could be to prevent large wealth managers from placing money on the market.
As for LedgerX, the company will not charge companies or individuals for the use of the new index. However, the company could build other index-related products, such as new derivatives. "We could implement a VIX bitcoin product that could be the first of many marketable products linked to price fluctuations in the crypt," he said.
Editor's Note: An earlier version of this article incorrectly reported the name of Paul Chou.
