Data reveals that Bitcoin has more and more behaved like a risk-on asset within the yr 2021 as its price actions have reacted to the VIX volatility index.
Bitcoin Cements Itself As A Risk-On Asset During The Year 2021
As per the newest weekly report from Arcane Research, BTC has behaved like a risk-on asset this yr because the crypto’s price has appeared to observe VIX.
“VIX” is the ticker image for the Chicago Board Options Exchange’s Volatility Index. This index tells us concerning the inventory market’s expectations of the volatility primarily based on S&P 500 index choices.
While the official title is the CBOE volatility index, the title “VIX” has caught on as the most well-liked option to discuss with it.
The VIX index is a real-time indicator that measures the anticipated volatility within the market for the approaching thirty days. The index can be also known as the “fear gauge.”
When the worth of this metric is excessive, it means a higher volatility within the inventory market could observe within the close to future. On the opposite hand, low values of the index would counsel a interval of low volatility may be there quickly.
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Now, here’s a chart that reveals the obvious relationship between the price of Bitcoin and the VIX index:
Looks like BTC's price has more and more change into associated to the index over the previous few years | Source: The Arcane Research Weekly Update - Week 51
As you’ll be able to see within the above graph, in the course of the yr 2019, which is earlier than COVID got here round, Bitcoin didn’t appear to be affected by concern within the broader market.
However, following the financial and monetary insurance policies that have been permitted in the course of the COVID period, institutional buyers began getting within the coin.
In 2020, the connection between VIX and the Bitcoin price was nonetheless unclear. But from the information of the yr 2021, it’s seen that there’s now a correlation between the 2 metrics.
Bitcoin has responded to concern within the inventory market throughout 2021, exhibiting that institutional buyers for probably the most half take into account the crypto to be a risk-on asset.
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The report notes that due to this, it could possibly be price keeping track of VIX as concern within the inventory market could have implications for BTC’s price.
At the time of writing, Bitcoin’s price floats round $47.5k, down 2% within the final seven days. The under chart reveals the pattern within the price of the coin over the previous 5 days.
BTC's price has plunged down in the previous few days | Source: BTCUSD on TradingView
Featured picture from Unsplash.com, charts from TradingView.com, Arcane Research