• Bitcoin has been positively correlated with the Wall Street index since March 2020. 
  • BTC is at risk of losing some of its recent gains as experts warn about a downside move in the S&P 500 ahead.
  • The Cboe Volatility Index surged 41% above its historical average, stirring an extreme uncertainty among stock investors.

Bitcoin appears to be at risk of losing a part of its recent gains as a stock market fear indicator dubbed “VIX” explodes above its historical average. VIX, the Cboe-based indicator, measures the S&P 500’s 30-day forward-looking volatility. Experts use this indicator to realize investors’ fears and risk tolerance. A higher VIX increases the probability of highly volatile moves, eventually leading to a period of panic selling.

Since March, the S&P 500 has surged constantly, assisted by major rallies in the share prices of Tesla and Amazon. At the same time, however, the S&P 500’s VIX has increased by 41% above its average at nearly 29, according to Cboe. This indicates potential shakeups in the stock market’s near future. 

Bitcoin traders, on the other hand, have been monitoring the S&P 500 to confirm their next directional bias. This is because of BTC’s increasing monthly correlation with the Wall Street index since March. Skew data reveals that the realized correlation hit a record high in July 2020. An increasing VIX reading further validates its command over the Bitcoin market with its long-term negative correlation with the leading cryptocurrency. 

Kristina Hooper, the chief global market strategist at Invesco, said that fears of an increased VIX reading also reflects in the bond markets. The yield on the US 10-year Treasury bond is close to a record low of 0.67, indicating an increased demand for safe-haven assets. Gold is also up by 18% on a year-to-date timeframe.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

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