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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I am following the VIX correlation with SPX and BTC together; if SPX breaks its actual resistance and goes for 4400 4500 it would mean the VIX still has room to go down and BTC Bounces from what ever low is going right now till 100K 200K the bull scenario in a few words for ends of 21' 1Q22'; but....if the SPX fail to break resistance the bear scenario 20% drop is on the table meaning VIX spiked and BTC will drop till Capitulation 12K 200WMA...
@BurakB_, I think I agree with this chart, the only thing is that I think it won't go that high before dropping. I don't think this is the right time to go long unless you are planning to hold for years instead of months or weeks. Bitcoin is here to stay and will go up anyway, but not before dropping to the level of around 27000 or slightly less. If you bought at the top, your best bet is to hold and not look back for atleast a few months just to calm your nerves. If you are seeking to buy you might be better off waiting just a few months. I think
peterbhc
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I love trading VIX and BTC - this made my morning. Thank you
blocks2chains
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Very interesting. Looking at this the bear market should not begin until the end of the year. Since most of those wedges got filled all the way in to the support range. Watch this space. Looking at this, BTC needs a wave down from here and then another run up until the end of the year.
PedroRolles
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Seems to be another Good Idea! Thak you, ,my friend you are full of good ideas. Amazing
Ky8
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What the hell is with DX1!?
Ky8
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@Ky8, central bank officials signaled on their so-called “dot-plot” that there could be two rate hikes in 2023. That's the reason.