New statistical evidence has emerged, which suggests that the Dynamics of the Bitcoin Market (BTC) is now intimately linked to reflux and flow at Wall Street.
Recently, the 90 -day correlation coefficient between the implicit volatility indices of 30 days of Bitcoin – Bviv of Volmex and Dvol de Deribit – and the S&P 500 VIX reached a record of 0.88, according to data source tradingview.
A positive correlation of 0.88 indicates that the two variables are closely linked. Wednesday, the correlation was 0.75. The VIX represents the implicit or expected price of prices of 30 days in the Wall Street actions index, the S&P 500.
The correlation of strengthening suggests that the implicit VIC implicit volatility indices evolve in gauges of fear, similar to the VIX, which generally falls during bull races and increases during sales.
The BVIV increased from around 67% to 42% this year, moving in the opposite direction of the BTC price, which increased by 26%. Historically, the BTC and its implicit volatility tended to move in tandem. Meanwhile, the VIX fell 11% this year, while the S&P 500 index won more than 8%.
According to Markus Thielen, founder of 10x Research, the growing institutional participation in the cryptography market, characterized by volatility sellers, is at the origin of the collapse of the implicit volatility of the BTC and the record correlation which results with the VIX.
The sale of volatility implies the drafting of calls out of money (OTM) to generate additional income in addition to the contract participations. Some traders also write Put OTM.
“This bitcoin cycle continues to be dominated by participants in Wall Street, who actively compress volatility,” Thielen told Coindesk.
“Rather than speculating on the directional level, many institutional actors sell purchase options to generate additional return – mirrifying traditional action income strategies.
Thielen added that the institutional framework contributed to the growing correlation of the BTC with American actions, “in particular as hedge funds and active managers apply the same macro playbook in the two asset classes.”
Read: Bitcoin’s “low volatility” rally from $ 70,000 to $ 118,000: a story of transition from Far West to Wall Street dynamics
