Cryptocurrency
Is The VIX Volatility Index Forecasting A Major Bitcoin Crash?
Is The VIX Volatility Index Forecasting A Major Bitcoin Crash?: (NewsBTC) Bitcoin price is consolidating just below $20,000. As the last confrontation with $10,000 has shown, consolidation below resistance is typically a bullish event. However, with such strong resistance above, the uncertainty surrounding the pandemic, the coming vaccine, and the change of power happening in […]
Is The VIX Volatility Index Forecasting A Major Bitcoin Crash?:
(NewsBTC) Bitcoin price is consolidating just below $20,000. As the last confrontation with $10,000 has shown, consolidation below resistance is typically a bullish event. However, with such strong resistance above, the uncertainty surrounding the pandemic, the coming vaccine, and the change of power happening in the United States, there’s a recipe for rejection as well.
And while signals are mixed and analysts are divided, the VIX volatility index could be warning of an extremely volatile drop to come.
The Bearish Case: VIX Volatility In The Past Triggers Crypto’s Biggest Crashes
The cryptocurrency market is confused currently. After chaotic capitulation on Black Thursday, Bitcoin has done the unthinkable and risen from under $4,000 to nearly $20,000 in a year underscored by uncertainty, fear, and a pandemic, unlike the modern world has ever witnessed.
The world first learning of what was to come in March 2020, triggered the Black Thursday panic selloff that cut the leading cryptocurrency by market cap down by over 60% in days.
The burst of volatility – measured by the VIX – is the largest in the asset’s young history. Bitcoin was born during The Great Recession, and the VIX hasn’t had anywhere near as sharp a spike as then, until 2020.
The VIX rose above a reading of 20 during most Bitcoin crashes historically | Source: BTCUSD on TradingView.com
The Volatility Index on Black Thursday spike to above a reading of 20, and has remained there since. The metric touched down on the key level, before beginning to turn back up – potentially signaling volatility ahead.
And this could be a bad sign with Bitcoin trading below its most powerful resistance yet of $20,000. According to the chart above, most instances of the VIX rising beyond a reading of 20 has led to a sharp selloff in crypto. While the market is at extreme exuberance, could this happen again?