Bitcoin traders are finally taking price sales seriously. The cryptocurrency’s fear gauge, the BVIV index, shows it.
BVIV, which measures the 30-day implied or expected volatility of the cryptocurrency, rose nearly 20% on Tuesday to 46.45%. It is the biggest one-day increase since February 5, according to data source TradingView.
Here’s why it’s important.
For about two months, the mood in the bitcoin market was calm. Even as BTC fell from its early May high of $82,000 to $75,000 last week, market sentiment hardly receded. BVIV actually remained around its year-to-date low of 40% during this move.
In other words, it was an arranged sale. No panic. But that changed on Tuesday, when BTC’s spot price fell over 6% to $66,000.
The BVIV index exploded with that price drop. The index is essentially a fear gauge. When it rises, traders aggressively buy options to protect against further downside. Tuesday’s nearly 20% rise signals that protective buying is back.
To put Tuesday’s move into context: back on February 5th, BVIV surged over 50% in a single day and hit over 90% as bitcoin crashed towards $60,000. Tuesday’s jump is nowhere near that level. But the direction of the move is what traders should worry about right now.
VIX-like behavior
Think of BVIV as bitcoin’s version of Wall Street’s VIX fear gauge. Since US bitcoin ETFs launched over two years ago, institutional players have poured into the market. That institutionalization has created something interesting: BVIV is now moving in the opposite direction of bitcoin’s spot price with increasing consistency. Price drops, fear increases. The price rises, the fear disappears.
It’s a relatively new dynamic for crypto, but not so much on Wall Street, where the S&P 500 and its fear gauge, the VIX, have been inversely correlated for decades.
The takeaway is that after two months of unusual calm, fear is creeping back into the bitcoin market. Whether Tuesday’s rise is a one-day blip or the start of a sustained volatility regime remains to be seen.
