Is Bitcoin Set for a Recovery? VIX's Historic Surge Suggests a Local Bottom

VIX's Second-Largest Spike in History Indicates a Local Bottom for Bitcoin: Van Straten

The VIX jumped 74% yesterday following a 25 basis point Fed rate cut and a hawkish outlook from Fed Chair Jerome Powell. This significant market movement has sparked discussions about potential implications for Bitcoin (BTC).

On December 18, the market was shaken as Bitcoin briefly fell below $100,000, while U.S. equities dropped around 3%. The dollar index (DXY) soared to a two-year high of 108, exerting pressure on global currencies.

The CBOE Volatility Index (VIX), often referred to as Wall Street's fear gauge, experienced its largest one-day jump since February 5, 2018, marking the second-largest increase in its history. Historically, substantial spikes in the VIX have indicated local bottoms for both Bitcoin and the S&P 500.

Examining the top three one-day changes in the VIX:

• The first occurred on February 5, 2018, when it surged by 116%. On that day, Bitcoin dropped 16% to $6,891, marking a local bottom, which later rebounded to over $11,000 by February 20.
• The second-largest spike happened on December 18, with a 74% increase.
• The third spike occurred on August 5, 2024, when the VIX increased by 65%. During that time, Bitcoin fell 6% to around $54,000, eventually climbing back to over $64,000 by August 23.

A similar pattern has been observed in the S&P 500 over the years, as evidenced by data shared by Charlie Bilello, chief market strategist at Creative Planning.

At the time of this writing, Bitcoin is trading above $102,000, while S&P 500 futures indicate a 0.37% gain, suggesting potential recovery as history may repeat itself.

Image Credit: Charlie Bilello