UMIP 41 -Add uVOL-BTC-APR21 as a price identifier

Mhairi · March 2, 2022, 1:13pm

The DVM should support price requests for the 30-day daily volatility of BTC/USD.

UMAprotocol/UMIPs/blob/master/UMIPs/umip-41.md

## Headers
| UMIP 41    |                                                                                                                                          |
|------------|------------------------------------------------------------------------------------------------------------------------------------------|
| UMIP Title | Add uVOL-BTC-APR21 as a price identifier              |
| Authors    | Sean Brown (smb2796), Kevin Chan (kevin-uma), Tom Ibold (Tommy1231232) |
| Status     | Approved                                                                                                                                   |
| Created    | January 25, 2021   
| [Discourse Link](https://discourse.uma.xyz/t/adding-volbtc-as-a-price-identifier/83 )    |  

## SUMMARY

The DVM should support price requests for the 30-day daily volatility of BTC/USD.

## MOTIVATION

The DVM currently does not support the 30-day day volatility of BTC/USD.

The volatility of Bitcoin is a major focus in the crypto and traditional finance world. Will the recent high volatility in Bitcoin continue throughout the year? Is Bitcoin too volatile to be considered a viable currency or safe haven asset? Whether volatility is considered high or low or where it will be in the future is always a debate.

In traditional finance there are several ways to express your view on the volatility of an asset. Most options traders would reflect this opinion on an asset by buying or selling options and delta hedging. This effectively neutralizes the price movement of the asset and isolates the value of the option. However, for an average trader this may be complex, costly and requires a lot of maintenance of the position. An easier way to reflect this view is through a futures contract on a volatility index. The most popular index is the VIX which is a volatility index on the S&P 500 that derives its value from a basket of index options. The centralized exchanges in the crypto world are borrowing this concept to create similar ways for users to trade the volatility of Bitcoin. For example, FTX designed BVOL tokens which use a basket of their MOVE contracts to effectively create a volatility index in a similar way. This requires a consistently deep and liquid options market which proves to be a challenge in crypto especially in the decentralized finance space.

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