Bitcoin Volatility Remains Stable as VIX and MOVE Spike

The Bitcoin (BTC) market is showing uncanny resilience in the face of renewed investor anxiety on Wall Street.

Data from CryptoCompare shows the Bitcoin Volatility Index (BVIN), which measures the implied or expected volatility over the next 30 days, has remained flat recently near the lower end of its three-month range of 60 to 100. Implied volatility becomes often equal. with the degree of uncertainty or anxiety in the market.

Meanwhile, the Chicago Board Options Exchange’s CBOE Volatility Index (VIX) — often referred to as Wall Street’s fear gauge — jumped from 18 to 23 over the past three days, hitting a 2023 high.

Alongside, the MOVE index, which measures volatility in US government bonds, has jumped to a one-month high of 120, end a four-month downward trend.

Bitcoin’s lack of participation in global volatility repricing is reminiscent of the days before March 2020 when traditional investors took little interest in digital assets, leaving the crypto market in its own world. Bitcoin first developed as a macro asset after the March 2020 crash, with BVIN typically following movements in the VIX closely since then.

“We attribute this correlation breakdown to reflect a continued mainstream disinterest in crypto products, as we return to the fringes of US capital markets and chart our own narratives with hopefully more uncorrelated alpha,” SignalPlus Ltd, a technology firm focused on democratizing crypto options, said in its daily market report.

Speaking of narratives, the most popular since late 2022 is that bitcoin will repeat history by increasing sharply in the months leading up to its fourth mining reward halving sometime in March 2024. Reward halving refers to a programmed code that slows the pace of bitcoin’s supply expansion by 50 % every fourth year.

“Conditions are ripe for a breakout in 2023 that could catalyze another bull market,” San Francisco crypto asset manager Bitwise wrote last month, noting the crypto’s tendency to rally ahead of the halving. “We are excited about the growth of layer 2 solutions, the development of ZK rollups and privacy solutions, and many other new opportunities for crypto,” the team added.

As for the jump in volatility in traditional assets, those markets have become jittery in response to fixed-income traders — given recent upbeat economic data — quickly reversing bets on potential Federal Reserve easing later this year.

Markets were previously confident that the Fed would raise the benchmark fed funds rate by just 25 basis points in March, but now show a 20% probability of a 50 basis point move. The yield on the two-year government bond has risen by more than 50 basis points to 4.64% in February. The dollar index, which tracks the greenback’s value against major fiat currencies, has bounced from 102.00 to 104.00 as international money flows benefit from higher yields.

“The risk of a ‘break higher’ in the economy with higher prices is a much bigger risk than recessionary concerns at this point,” SignalPlus said. “Shares were on borrowed time against the movement in interest rates and currency.”