- Bitcoin’s volatility is now closely linked to movements on Wall Street.
- The 90-day correlation between Bitcoin’s implied volatility and the S&P 500’s VIX reached a record high of 0.88.
- Bitcoin’s volatility has dropped significantly this year while its price has increased.
- Institutional investors, especially volatility sellers, are contributing to these changes.
- Experts say Bitcoin is starting to mirror traditional stock market dynamics due to increased institutional involvement.
New data shows that Bitcoin’s market behavior is increasingly tied to activity on Wall Street. The 90-day correlation between Bitcoin’s implied volatility and the S&P 500’s volatility index, or VIX, reached a record high of 0.88, based on information from TradingView.
On Wednesday, the correlation remained strong at 0.75. The VIX is an index that measures the expected 30-day price swings in the S&P 500, reflecting investor uncertainty.
The growing connection suggests that Bitcoin’s implied volatility—measured by Volmex’s BVIV and Deribit’s DVOL indexes—is acting more like a market “fear gauge,” similar to how the VIX functions for stocks. The BVIV index dropped from about 67% to 42% this year while Bitcoin’s price increased by 26%. Traditionally, Bitcoin’s price and its implied volatility have moved together. Over the same period, the VIX fell by 11% as the S&P 500 index gained over 8%.
Markus Thielen, founder of 10x Research, said increased institutional activity is behind the change. He noted that many investors are now selling volatility—offering out-of-the-money (OTM) call and put options to collect extra income—which compresses market swings. “This bitcoin cycle continues to be dominated by Wall Street participants, who are actively compressing volatility,” Thielen said to CoinDesk.
“Rather than speculating directionally, many institutional players are selling call options to generate additional yield—mirroring traditional equity income strategies. As a result, directional flows tend to follow broader risk-on/risk-off dynamics familiar to legacy markets,” Thielen explained.
Thielen added that this approach causes Bitcoin to behave more like U.S. equities, especially as large investment firms apply traditional finance strategies to both assets.
For further reading, see: Bitcoin’s ‘Low Volatility’ Rally From $70K to $118K: A Tale of Transition From Wild West to Wall Street-Like Dynamics.
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