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Bitcoin’s Correlation With Volatility
Bitcoin is rather more than an “inverse VIX” however that doesn’t cease the market from buying and selling it as such. (“VIX is the ticker symbol and the popular name for the Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options.”)
As Bitcoin’s schooling, adoption and monetization carries on, fundamentals and community development would be the extra necessary driver of worth appreciation. But within the present setting, danger-off market indicators and broader market volatility are within the driver seat.
We can roughly quantify this bitcoin and volatility relationship by wanting on the Chicago Mercantile Exchange bitcoin futures and VIX rolling correlations throughout 30-day, 90-day and 180-day timeframes over the previous couple of years.
Bitcoin futures and VIX 30-day correlation
Bitcoin futures and VIX 90-day correlation
Bitcoin futures and VIX 180-day correlation
On the opposite hand, March 2020 gave us an attention-grabbing instance of how bitcoin might carry out publish market crash, huge volatility spike and elevated debt monetization throughout financial and fiscal insurance policies to assist rescue the market and financial circumstances. Bitcoin is now 716% up from its March 2020 backside of $4,930. Bitcoin’s correlation to the VIX is unhealthy now throughout a credit score unwind, but it surely’s a optimistic attribute throughout reflationary intervals and falling volatility.
From a broader macroeconomic perspective, this is why we stay bullish on bitcoin on an extended time horizon publish one other situation crash in danger property. If we’re to see this situation play out and when the mud settles, bitcoin might be primed to outperform virtually each different asset in our view primarily based on its adoption curve, fundamentals and as a superior financial community.
