Bitcoin Volatility Index BVIV Reenters Key Historical Zone, Signaling Risk of Sharp Swings

Bitcoin’s 30-day implied volatility index, or BVIV, has reentered a range that has repeatedly preceded sharp selloffs, raising the risk of bigger swings in the crypto market.

CoinDesk reported on July 20 that BVIV is fluctuating between 34% and 38%. The gauge is the crypto market’s equivalent of Wall Street’s fear index, the VIX, and moves with demand for options contracts.

In recent years, each time BVIV entered that band, a jump in volatility and a drop in prices followed, CoinDesk reported. After BVIV moved into the range in late May, Bitcoin tumbled from $74,000 to below $60,000 in less than a week. Similar patterns appeared during the early-February selloff and the pullback after October’s record high.

BVIV is now below both its 30-day and 200-day simple moving averages. Because volatility has historically shown mean-reverting behavior, periods of low volatility such as the current one have tended to give way to bigger market swings, CoinDesk said.

Bitcoin is trading around $64,000 and has remained rangebound since last Wednesday. Some analysts have cited two straight weeks of inflows into spot exchange-traded funds as a positive sign, but CoinDesk said that was minor compared with the billions of dollars that left the market over the previous eight weeks.

Volatility gauges in traditional financial markets are sending mixed signals. South Korea’s Kospi VIX is above 70%, its highest level since the 1990s, while the U.S. VIX jumped more than 12% last Friday to 18%. By contrast, the MOVE Index, which tracks 30-day U.S. Treasury volatility, has held steady around 70% since April.