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This week, Cole from Volmex Finance joined the call to walk us through their crypto volatility indices.

The link to the recording and summary can be found below

40:09 – Starter Tutorial: Earn Up to 20.8% YTM with a Shapeshift Bond on Arbor Finance

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Volmex is a protocol that allows users to speculate on cryptocurrency volatility through the use of its Volmex Implied Volatility indices (BVIV and EVIV).

The protocol offers various products related to these indices, including volatility tokens (V1 and V2), which can be used for hedging and expressing views on the market.

The data for the indices is gathered from multiple centralized exchanges, though the company hopes to eventually be able to use decentralized finance (DeFi) options data in the future.

Users of the protocol include traders and liquidity providers, who can use it for hedging, participating in swaps, and as a benchmark for market volatility.

The protocol’s tradable tokens track the VIX index accurately and can be used to express a view or hedge against volatility.

 Welcome. We are glad to have you here. To start, let’s talk about Volmex. For those who may not know, Cole is the founder of Volmex, a protocol that allows users to speculate on cryptocurrency volatility, similar to how the VIX index works for the stock market. Can you explain what Volmex does and how DeFi users can use it to profit or hedge their investments?

 At Volmex, we create the Volmex Implied Volatility indices (BVIV and EVIV) and publish them on our website and on the websites of some of our partners as a way to measure volatility in the cryptocurrency market. We also offer several products related to these indices, including volatility tokens (V1 and V2), which can be used to express a view or hedge a portfolio. Overall, our goal is to provide reliable volatility indices and tools for hedging and speculating in the market.

 It says on this chart site that the indices are derived from real-time crypto options pricing. Which exchanges do you guys pull your prices from?

 The crypto options market is still developing and there is currently not a DeFi order book options platform that provides reliable quotes with enough liquidity to accurately price an index. Therefore, we gather data from multiple centralized exchanges such as Deribit, OKX, and soon Bybit to create a global order book. We then use this global order book to derive our index. Using multiple data sources allows us to have an advantage over using only one source. In the future, we hope to be able to do this solely based on DeFi options data, but that is currently not possible due to the current state of the market.

 Oh, yeah, totally agree with you there, because options pricing in DeFi is insane compared to centralized exchanges. It’s so expensive to hedge or speculate on chain. It doesn’t make sense at all, right?

 There are many DeFi option vaults available, but they are not as flexible and do not provide the necessary quotes for us to accurately calculate our volatility index. However, we are still excited about the developments in the DeFi option space. At this time, there is not enough options liquidity to accurately price our index. If you would like more information on how we have structured our index, please visit our website, volmex.finance, and click the methodology link to view a technical paper that explains our approach.

 What are the best ways to use the protocol? What strategies do most of your users use and, how can it help a regular DeFi investor protect their portfolios and bet on long-tail events?

 There are two main groups of users for the Volmex protocol: traders and liquidity providers (LPs). Traders can use the app to purchase tokens like EVIV and BVIV for various purposes, such as hedging their portfolios against volatility. LPs, on the other hand, earn trading fees by providing liquidity to the protocol. They can also participate in swaps between different tokens and stablecoins. Additionally, some users may simply use Volmex as a benchmark for market volatility.

 You can think of it like a fear index that it’s tracking expected volatility in the market and how the market’s pricing that. That’s a great way to look at it.

Do the tradable tokens used to track the volatility index, do so accurately? In traditional markets, VIX isn’t directly tradable and other financial instruments like exchange-traded notes and derivatives do not always closely follow the underlying index. Is this also the case with the tradable token, or is it more precise in its tracking?

In V2, we have created a new architecture that allows for the trading of volatility tokens at their current reference or oracle price. This is made possible through the use of an innovative AMM (automated market maker). In V2, trades can be done at the current volatility index level, with liquidity providers serving as counterparties. In the coming months, we will also be releasing other products that use different mechanisms to maintain reference pegs. Overall, Volmex Finance V2 (which is currently live on Polygon) uses oracles and liquidity providers to enable traders to do swaps at the current oracle price.

 What’s the difference between EVIV and IEVIV?

 EVIV is a long token that trades with the index. IEVIV is a short token that is inversely related to EVIV. These two tokens always sum to 400 and trade on an exchange. If EVIV is at 100, IEVIV should be at 300. In the future, there will be different combinations of these tokens with added functionality. The EVIV token can be thought of as a spot token for the EVIV index, while future products may introduce additional features. We have a suite of exciting products coming that will provide value to traders.

 Users can purchase either the EVIV token or its inverse if they expect market’s to remain calm. Alternatively, they can mint both tokens using stablecoins and provide liquidity. What’s the current yield for liquidity providers?

 The LP fees collected on the portfolio page may vary depending on the deposited and provisioned LP. The messaging about these fees could be improved to make it clearer. The trading fees, which have been varying, may also impact the LP fees.

It would be great to see just an APY indicative of the past seven days or the past 30 days.

 What has the response from the community been like on the platform? Have larger, more sophisticated investors been using it as a hedge, or are smaller traders using it for gambling purposes like in the stock market?

 Our investors and partners include both institutional and retail users. We are currently on Polygon and will soon be on Arbitrum as well. In the last couple of weeks, we have had over 6,000 addresses interact with our new version, and over the past year and a few months, we have had around 30,000 addresses on the v1 version. We have seen interest from both institutional and retail users, with an even split between those interested in hedging and speculation. However, we expect to see more users using our products for risk management and hedging as the market evolves and there is a greater focus on risk management. In addition to those speculating and hedging, we have also seen users using our platform as a benchmark.

 Do you guys have a token yet? And if not, are there plans for any?

 We currently have four product tokens: BVIV, EVIV, IEVIV, and IBVIV. However, we do not have a plan for a governance token at this time. While we are open to considering it in the future, we do not have an official plan in place. Our primary focus is on building the best product and doing what is best for our users.

We don’t have plans for a token or an airdrop, but we definitely will be committed to doing what’s best for the community and our users.

Cole – Volmex

 Have you guys raised any funding? How are you guys funding the project and how long is your runway? Are you guys well-capitalized?

 We are. We have partnerships with KBI Ventures, DWF Labs, CMS Holdings, IOS G Ventures, and others.

 Do you have any plans on adding another token to track besides ETH and BTC? Or if not, what type of things are you looking for? If you wanted to add in another like L1s in there?

 We would like to offer Volmex implied volatility indices, but we currently do not have access to robust options data. This is because the options exchanges that we typically use, such as Derbid, have delisted coins like Solana due to issues with tick sizing. As a result, we do not have enough options data for other top coins like Bitcoin and Ethereum. We hope to offer these indices in the future, but for now, it is not feasible due to the current state of the market. In the meantime, we will continue to explore other opportunities using the data that we do have available.

We have another question in the chat asking if Alameda and Three Arrows invested in Volmex in the past, and if yes, how did their bankruptcy affect you, if at all?

 Volmex received investment from Alameda and Three Arrows in its first round of funding. We don’t have any financial or business relationships with these entities beyond them being investors. Volmex is not affected by any current or potential issues involving Alameda or Three Arrows.

It was a really a pleasure to come on today, the Defi Alpha call. You guys can head to our website, volmex.finance, and keep an eye out for new products, announcements, and partnerships, and join the community. It was great to be here and tell you guys more. Thanks for having us.

The latest Fed statement was decidedly hawkish. The market had expected rates to top out at around 4.5-4.6% in 2023, but the latest projections show that rates will cross 5% and stay there for most of 2023. This is concerning to markets because high, persistent interest rates can cause financial stress for heavily leveraged companies and lead to a cycle of bankruptcies and layoffs.

Additionally, emerging markets around the world have borrowed heavily at low-interest rates and now face the challenge of refinancing this debt as the dollar strengthens and interest rates rise.

Commodity prices are already returning to levels seen in November 2021, despite the inflationary pressures caused by events in Ukraine. .

This week, Cole from Volmex Finance joined the call to walk us through their crypto volatility indices.



The link to the recording and summary can be found below.



00:00 – Market Overview

02:59 – Cole from Volmex joins

21:25 – ETH

22:28 – Bitcoin

2...

DeFi Alpha Call #32