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bitcoin vix risk
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How the VIX Could Pave the Way Higher for Bitcoin and Risk-On Assets

Tony Spilotro by Tony Spilotro
2 years ago
in Bitcoin
0
Advertisement

Bitcoin could be at a major turning point in its lifecycle, but the risk hanging over the global markets may get in the way. According to the VIX, a measure of anticipated market volatility has been elevated all throughout 2020 to the highest point since the Great Recession.

The metric could lose a key support level that would let high-risk assets like Bitcoin, stocks, and other crypto assets to fly. If support holds, however, things could get extremely dangerous leading into the 2020 presidential election. 

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Markets have been irrational ever since stimulus efforts began pumping the money supply. The stock market went from the worst collapse in years, to one of the greatest rallies on record.

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Bitcoin crashed from $10,000 to $4,000, and is already back well above the critical resistance level and is currently attempting to flip it to support.

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The cryptocurrency’s success in doing so could hinge on another completely unrelated chart losing important support., That chart is the CBOE VIX – a volatility index measuring the expected volatility in the S&P 500.

vix cboe sp500

CBOE VIX Volatility Index Retesting Support  | Source: TradingView

It is currently hovering at a level that, in the past, breaching above led to a rollercoaster ride across markets. Falling back below it could bring some much-needed calmness to the world of finance.

A fall even deeper back into the “teens would be mega bullish for all risk assets” claims the CEO and Founder of the Trading Dojo. But why?

Bitcoin Rallies When VIX Reveals Risk is at Its Lowest

Taking the VIX index and adding it to a BTCUSD price chart reveals some interesting correlations with Bitcoin throughout its short price history.

Bitcoin appears to pump each time the VIX experiences a bout of tranquility rather than the turbulence we’ve seen in 2020 thus far.

bitcoin btcusd vix cboe

BTCUSD Bull Rallies Conicide With VIX Calm  | Source: TradingView

Each time the VIX has fallen into the teens, as the analyst says, Bitcoin has rallied, and the rest of the high-risk crypto market followed its lead. The most recent period of calm led to the top at $14,000, and before that was the crypto asset’s all-time high at $20,000. Before that, the VIX easy street paved the way for Bitcoin’s then-record at $1,200.

RELATED READING | WHY LACK OF LEVERAGE COULD KEEP BITCOIN AND STOCKS CLIMBING DESPITE SELLOFF

A fall back below 20 and into the teens could be exactly what Bitcoin needs for its bull run breakout. However, if VIX holds the support pictured in the first chart above, another massive crash is possible.

Whatever the case may be, the VIX could provide clues as to what happens next, and investors should be watching the metric closely to find out.

Featured image from DepositPhotos, Charts from TradingView
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a digital media executive and global remote work leader with a decade of content experience and excellence. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter and feel free to drop me a line if you would like to work together.

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