As a result, the world has seen a sheer amount of correlation and direct relationship between the traditional financial markets and the crypto market. While the US equities market and Bitcoin have not particularly moved in tandem in recent months, there is no denying the existence of a relationship between the asset classes.
For context, volatility refers to how quickly prices change within a short period and is often seen as a way to gauge market sentiment. Wedson mentioned that the VIX Index, also known as the fear index, is widely used as a risk thermometer among participants in the traditional financial markets.
Wedson said:
In other words: don’t waste hours analyzing BTC vs. S&P 500 when BTC’s correlation with the VIX is low or negative — that’s usually when BTC has a higher chance of entering an explosive phase.
The on-chain analyst said that on the flip side, when the VIX is high, it is worth looking at the relationship between Bitcoin and US equities markets, as fear in the latter can influence the behavior of the former. However, Wedson noted that the VIX is currently declining, and as such, the S&P 500 Index might not offer much help in analyzing Bitcoin’s next move.
As of this writing, BTC is valued at around $117,888, reflecting no significant price movement in the past 24 hours.
