Nodeseeds has invested in Volatility Protocol, a DeFi protocol that allows users to capitalize on the volatile nature of the crypto market.
Big Market, Big Moves
The S&P 500 crashing by more than 5% makes for some significant news. However, when Bitcoin’s price crashes by 5%, nobody bats an eye. Volatility and the crypto market have become synonymous with one another. The intense price swings associated with the asset class sends shivers down the spines of even seasoned traders. Volatility Protocol allows users to take advantage of this highly volatile marketplace via their proprietary DeFi volatility feeds.
The market volatility associated with crypto isn’t going away any time soon. DeFi continues to eat the traditional financial industry and remains on an unprecedented growth trajectory. Technical innovations in the form of new protocols, new entrants to the market, and the unfettered hype associated with these variables mean big price swings are sticking around for the foreseeable future. If you can’t change the game, take advantage of the rules by making volatility profitable.
Riding The Waves
The approach taken by the Volatility Protocol team already exists in traditional financial markets. The VIX index tracks the near-term volatility of the S&P 500, allowing traders to make insights about potential future price movements. Volatility Protocol leverages this approach and brings these insights to the DeFi marketplace using their real-time index of price data. With this approach, Volatility Protocol offers users two digital assets that track the near-term volatility of Ethereum.
The volETH index is a real-time measure of the price volatility implied by the Ethereum’s options market. The volETH index project’s the expected price volatility of Ethereum over a 14-day period — the more volatile Ethereum’s price, the higher volETH rises. Using this index, users can take long positions on Ethereum’s volatility. Contrarily, the ivolETH index is the inverse of the volETH index. The ivolETH index allows users to take short positions on Ethereum’s volatility — the more stable Ethereum’s price, the higher ivolETH rises. The negative correlation between the volETH and ivolETH indexes allows users to take advantage of both increases and decreases in Ethereum’s volatility.
Both indexes provided by the Volatility Protocol interface with UMA contracts, a DeFi protocol that allows for synthetic assets. Users must offer collateral to mint shares of the index with a current minimum collateralization ratio of 150%. Minting equal shares of both volETH and ivolETH allows users to take a near-neutral position on Ethereum’s market volatility, emulating a popular options trading strategy. Volatility Protocol’s service offerings demonstrate how DeFi improves upon existing financial tools, further increasing their accessibility and evolving their potential applications.
Consistency Through Ups and Downs
Volatility Protocol’s applicability is readily apparent as the crypto markets slowly recover from a highly volatile May. Nodeseeds continues to work hard regardless of market forces to deliver NDS tokens holders disproportionate value. Our position in Volatility Protocol demonstrates the increasing diversity of the Nodeseeds’ portfolio and how we’re honing the Nodeseeds investment strategy to best serve our investors for years to come.
Market volatility has you down? Check out Nodeseeds latest investment report and remind yourself that the stunning innovations in DeFi haven’t slowed down in the slightest! Make sure to connect with Nodeseeds on social media to keep up with our rapidly expanding portfolio of investments, partners, and innovations.
