BITCOIN and VIX. Volatility Spike = BTC Bear Market?

With volatility spiking again lately on the markets, I thought it would be a good idea to take a look at Bitcoin against the Volatility Index (VIX). This is a simplified correlation on the 1W time-frame, BTC in orange, VIX in blue, but rather informative on the long-term.

As you see when VIX is stable, most of the times it tends to trade within a Falling Wedge. This indicates that the market volatility is calm and prices tend to enjoy increases. BTC is no different.

However, since 2011, when these Falling Wedge patterns break to the upside on big volatility spikes, it normally translates to a Bear Market for Bitcoin or at least a last dump or sizeable correction. The exception to that rule was the August 10, 2015 1W candle spike for VIX, which on the contrary was a perfect buy signal as the new Bull Cycle started.

At the moment VIX remains within the Falling Wedge that started after the March 2020 COVID crash candle settled down. Recently however we are seeing movement so attention is needed in case the Wedge breaks to the upside. However this is not likely to happen now as if it does it will be the first time the spike takes place above VIX's Support Zone (even though marginally).

How accurate do you think this correlation is in predicting BTC Bear Cycles? Feel free to share your work and let me know in the comments section!



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