Data shows that Bitcoin has increasingly behaved like a risk-on asset in the year 2021 as its price movements have reacted to the VIX volatility index.
As per the latest weekly report from Arcane Research, BTC has behaved like a risk-on asset this year as the crypto’s price has seemed to follow VIX.
“VIX” is the ticker symbol for the Chicago Board Options Exchange’s Volatility Index. This index tells us about the stock market’s expectations of the volatility based on S&P 500 index options.
While the official name is the CBOE volatility index, the name “VIX” has caught on as the most popular way to refer to it.
The VIX index is a real-time indicator that measures the expected volatility in the market for the coming thirty days. The index is also often referred to as the “fear gauge.”
When the value of this metric is high, it means a greater volatility in the stock market may follow in the near future. On the other hand, low values of the index would suggest a period of low volatility might be there soon.
During the year 2019, which is before COVID came around, Bitcoin didn’t seem to be affected by fear in the broader market.
However, following the monetary and fiscal policies that were approved during the COVID era, institutional investors started getting interested in the coin.
In 2020, the relationship between VIX and the Bitcoin price was still unclear. But from the data of the year 2021, it’s visible that there is now a correlation between the two metrics.
Bitcoin has responded to fear in the stock market during 2021, showing that institutional investors for the most part consider the crypto to be a risk-on asset.