Uncovering Bitcoin’s Distinct Volatility: Examining the Surging VIX and MOVE Indices

    • The volatility of Bitcoin (BTC) has recently decreased, maintaining a positive correlation with the cryptocurrency’s price.
    • Volatility indices for stock and bond markets, VIX and MOVE, have risen due to risk avoidance.
    • One analyst predicts that a continued increase in MOVE may impact Bitcoin’s price.

    Following a string of unyielding gains, Bitcoin’s (BTC) price has recently seen a correction, tracking the downturn in U.S. stocks and bonds.

    In contrast, BTC’s decline shows little indications of fear or distress compared to conventional markets, where expected or implied volatility indexes, also known as “fear indicators,” have registered notable surges.

    Bitcoin’s price has fallen by 7% this month. However, according to data from TradingView, Deribit’s BTC DVOL index, which measures expected price volatility over the next 30 days, has decreased from 75% to 70% annually. This marks a continuation of the downward trend seen since March’s peak at 80%.

    In traditional markets, selling off typically triggers a rise in implied volatility, as demand for options influence this metric.

    Contrastingly, the Chicago Board Options Exchange’s VIX, which measures anticipated price fluctuations over four weeks, has magnified substantially from an annualized 13% to 19%. The index is centered on options connected to the S&P 500 index, which has decreased by 5.4% this month.

    The MOVE index, which gauges expected volatility in U.S. Treasury notes, has increased from 94% to 111% alongside a decline in bond prices, resulting in increased yields.

    The inverse trend in BTC DVOL does not imply that Bitcoin is perceived as a secure asset or that it is in a bull market. Since 2023, BTC’s implied volatility has been positively correlated with its price.

    “In this bull market, Bitcoin is still firmly situated in a positive spot/vol correlation regime. As the price begins to rise, BTC volatility rises and softens when we sell off,” stated David Brickell, head of international distribution at Toronto-based crypto platform FRNT Financial.

    Brickell also added, “Tradfi risk skew is still geared towards the downside, as sell-offs are typically more intense than slow, gradual rallies.”

    Given BTC’s atypical implied volatility profile, traders may find it more advantageous to make bullish implied volatility bets during price spikes rather than during market downturns.

    BTC DVOL, VIX, and MOVE. (CoinDesk, TradingView)
    BTC DVOL, VIX, and MOVE. (CoinDesk, TradingView) (CoinDesk, TradingView)

    The Impact of MOVE Spikes

    Bitcoin bulls hoping to see a resumption of the uptrend should be cautious of a potential increase in the MOVE index.

    This is because heightened volatility in U.S. Treasury notes, which dominate global collateral and securities financing, often results in tighter market conditions and increased investor risk aversion.

    In Monday’s issue, the founders of newsletter service LondonCryptoClub stated, “Treasuries are frequently used as collateral for borrowing and leveraging into riskier investments. When bond volatility rises, a greater markdown is applied to that collateral, leading to reduced leverage and liquidity in the system. Coupled with the strengthening dollar, this has placed pressure on stocks and also Bitcoin.”

    11:46 UTC: Updated VIX value. The previous version erroneously mentioned VVIX value.

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