The Stock Market Is (So Far) Ignoring Bitcoin’s Volatility Spike

The Stock Market Is (So Far) Ignoring Bitcoin’s Volatility Spike
Andrew Rummer

over 2 years ago1 min

Mentioned in story

Bitcoin’s implied volatility  – a measure of expected swings derived from the prices investors are paying for options – spiked higher over the weekend as crypto investors reeled from several days of hectic trading. 

According to T3 Index’s BitVol index, the cryptocurrency’s implied volatility (shown in blue on the chart above) climbed to 160 on Sunday, closing in on the high of 190 set in March 2020 as pandemic panic set in. Meanwhile, a comparable measure for US stock market volatility, known as the VIX (in pink), is so far ignoring the excitement in crypto land and trading at just 19.

The trend is a marked contrast to last year, when volatility surged simultaneously in almost all markets in response to coronavirus’s global spread. So far, any excitement is remaining confined to crypto markets – while stocks and bonds shrug. The chart below shows Bank of America's MOVE Index of implied volatility in US government bonds, which has also remained subdued recently.

Chart of MOVE Index

As much as crypto has become more established in traditional financial circles in recent years, the $1.6 trillion combined value of all crypto tokens is still tiny compared to the $95 trillion valuation of global stock markets or the $120 trillion valuation of global bonds. And this week’s indifferent reaction from stock and bond investors to crypto’s gyrations underlines that divide.

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