When It Comes to Peak Volatility, the VIX has Bitcoin Beat

When it comes to volatility, bitcoin is no match for the volatility index. The CBOE VIX, Wall Street’s preferred barometer of investor anxiety, just saw its ten-day volatility spike beyond any level bitcoin has seen over the past seven-and-a-half years.

Record-Breaking Volatility

The month of February has seen dramatic moves for the CBOE VIX. The index’s ten-day volatility surged to a record 520% through Wednesday, according to Bloomberg, as stocks recorded their fourth consecutive daily advance. That’s not only the highest reading in the VIX’s 28-year history, but also eclipsed bitcoin’s peak of 501% in April 2013.

This phenomenon is captured in the following chart:

Source: Bloomberg.

Volatility spiked through the roof last week as stocks completed one of their worst selloffs since the financial crisis. On Feb. 6, the VIX briefly traded above 50 for the first time since 2015. The day before, it rose more than 115% for its biggest move on record.

The index has leveled off over the past five days amid a broad relief rally on Wall Street. It now trades right around the historic average of around 20.

The VIX measures anticipated volatility in S&P 500 Index options over the next 30 days. More often than not, it trades in the opposite direction of the benchmark S&P 500 Index. Prior to the latest rally, the index spent the better part of two years trading at roughly half the historic average.

Bitcoin Prices Gaining Traction

Bitcoin is no stranger to volatility. The coin set an all-time high near $20,000 in December before plunging below $6,000 – all in under two months.

After weeks of instability, bitcoin prices are finally regaining momentum. On Thursday, the coin climbed above the $10,000 mark for the first time in two weeks. In doing so, it extended its five-day recovery to more than 23%.

At its highest point Thursday, bitcoin traded at $10,209.42. It was last seen trading at $10,135 for a market cap of $171 billion.

Bitcoin’s latest acceleration is significant for at least two reasons. Firstly, prices have overcome a major technical hurdle around the $9,200 mark, signaling the return of bullish momentum. The liftoff also suggested that investors were moving past FUD-induced volatility that has dogged the market for the past five weeks.

Bitcoin’s market share has also risen in recent days, with BTC now representing close to 36% of the total market. As of Thursday, about 35% of total trade volumes were devoted to bitcoin.

In terms of the market’s short-term trajectory, our analyst Mate Czer issued the following statement on Thursday:

“The sector is now back near the $500 billion mark in market capitalization, but investors shouldn’t get complacent here, as corrections will come along the rally, and the dominant downtrend is intact in most cases, with BTC being no exception.”

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi

Leave a Reply