It’s a risk-on environment, with inventory leading the major cryptocurrencies high, but Wall Street’s fear gauge VIX has sparked some nerves.
On Monday, the Wall Street benchmark index, the S&P 500, set a record high for the fourth consecutive year trading day, reaching 6,519 points. The high-tech NASDAQ index also hit a lifetime high, with the Dow Jones trading near the peak recorded on Thursday.
The stock rose ignoring a weakened September manufacturing survey on Wednesday as bond yields fell in anticipation of a Fed rate cut at 25 bases. Traders expect to fall from the current 4.25% to 3% within the next 12 months, according to Fed Funds Futures.
Still, Bitcoin It had no clear direction as it swept back and forth between $114,000 and $117,000, forming an indecisive doji candle. At the time of writing, it changed hands at $115,860 and continued its advanced trading pattern in August, exceeding its record high of over $124,000.
Dour’s price measures could be due to long-term holders continuing to benefit and counter bullish pressure from the influx of spot ETFs.
Other major tokens such as ether (eth)XRP and dog coin I also lost my upward momentum.
Ethereum’s Ether Token was pulled back from nearly $4,800 to $4,500 in three days. The weaknesses are bewildered as ether is commonly known as internet bonds due to its steaking yield mechanism.
The pay-focused XRP returned to $3.00, marking a weak follow-through of bullish breakouts from the descending triangle confirmed last week. Meanwhile, Dogcoin, the leading meme token by market value, fell sharply from 30.7 cents to 26.7 cents in reports of whale sales.
Analysts said the reduction in the 25 base point rate will allow us to resume grinding, which is higher at BTC. Meanwhile, a surprising 50 bps move can make inventory, crypto and gold ferocious.
Look out for VIX and BTC VOL indexes
The rise in US stocks on Monday was marked by a rise in the VIX index. This represents the options-based implicit or expected volatility of the S&P 500 over the next 30 days.
VIX rose from 6% to over 15.68 points. Tuesday’s spikes are still largely at a few months’ lows, but they require caution for two reasons. First, historically, the two have moved in opposite directions, as evident from the almost 90 correlations over a period of 90 days.
Second, as noted in X’s volume-driven market intelligence platform Q, the breakdown of negative correlations often precedes revisions.
“Today’s SPX has risen at VIX, which often stretches the downsides of upward positioning, grabbing trader calls, or hedging (with PUTS), making the market vulnerable,” Menthor Q said.
The VIX is affected by demand for options, and the index increase on Tuesday could have been led by traders seeking S&P 500 puts or downside protection.
Perhaps market participants are anticipating a revision following the expected 25 baseline Fed rate cuts on Wednesday.
BTC implies an increase in volatility
Volmex’s Bitcoin also rose 3% on Monday, representing the 30-day expected price turbulence, and maintained a positive correlation with VIX.
Note that the historic positive correlation with BTC’s implicit volatility index has been negatively reversed since the spot ETF was published last January.
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