Back

Bitcoin's Implied Volatility Shows Historic Correlation with S&P 500

The 90-day correlation coefficient between Bitcoin's implied volatility and S&P 500 volatility has reached a record high, reflecting institutional dominance in crypto markets.

BTC

Summary

The 90-day correlation coefficient between Bitcoin's 30-day Implied Volatility Index and the S&P 500 Volatility Index has hit a record high of 0.88, indicating a significant linkage between the cryptocurrency market and US stock volatility. Analysts attribute this increase to Wall Street institutions dominating the current crypto market cycle, with institutional investors compressing volatility through extensive call option selling. Since the start of the year, the BVIV index has decreased from 67% to 42%, while Bitcoin's price has risen by 26%.

Terms & Concepts
  • Implied Volatility: A metric that reflects the market's expectations of future price fluctuations, often used in options pricing.
  • S&P 500 Volatility Index: A measure of the market's expectations of future volatility in the S&P 500 index, often referred to as the VIX.
  • Call Options: Financial contracts that give the buyer the right, but not the obligation, to purchase an asset at a specified price within a specific time frame.