The Bitcoin (BTC) market is showing uncanny resilience amid renewed Wall Street investor anxiety.
Data from CryptoCompare shows that the Bitcoin Volatility Index (BVIN), which measures implied or expected volatility over the next 30 days, has recently remained flat near the bottom of its three-month range of 60 to 100. Implied volatility is often equated with the level of uncertainty or fear in the market.
Meanwhile, the Chicago Board Options Exchange’s CBOE Volatility Index (VIX) — commonly referred to as Wall Street’s fear gauge — has climbed from 18 to 23 over the past three days, hitting a 2023 high.
Meanwhile, the MOVE index, which measures US Treasury volatility, rose to a monthly high of 120, ending a four-month downtrend.
Bitcoin’s lack of participation in the repricing of global volatility is reminiscent of the days leading up to March 2020, when traditional investors showed little interest in digital assets and left the crypto market in its own world. Bitcoin only emerged as a macro asset after the March 2020 crash, with BVIN typically closely following movements in the VIX since then.
“We attribute this correlation break to an ongoing mainstream disinterest in crypto products as we return to the fringes of US capital markets and drive our own narratives with hopefully more uncorrelated alpha,” according to SignalPlus Ltd, a technology company focused on democratizing crypto- Options, according to its daily market report.
Speaking of narratives, the most popular since late 2022 is that Bitcoin will repeat history by surging in the months leading up to its fourth mining reward halving, due sometime in March 2024. The reward halving refers to programmed code that slows the pace of Bitcoin supply, expanding by 50% every four years.
“Conditions are ripe for a 2023 breakout that could spark a new bull market,” San Francisco-based crypto asset manager Bitwise wrote last month, noting the crypto’s tendency to rally ahead of the halving. “We’re excited about the growth of Layer 2 solutions, the development of ZK rollups and data protection solutions, as well as many other emerging crypto capabilities,” the team added.
As for the rise in volatility in traditional assets, these markets have become jittery as interest rate traders quickly reversed their bets on possible easing by the Federal Reserve later this year, taking into account recent optimistic economic data.
Markets were previously certain that the Fed would raise interest rates by just 25 basis points in March, but are now showing a 20% probability of a 50 basis point move. The yield on the 2-year Treasury note rose more than 50 basis points to 4.64% in February. The dollar index, which tracks the value of the greenback against major fiat currencies, rose to 104.00 from 102.00 as international money flows benefit from higher yields.
“The risk of a ‘breakthrough’ in the higher-priced economy is a much bigger risk than recession concerns at this point,” SignalPlus said. “Equities were against interest rate and currency moves on loan.”
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