Bitcoin (BTC) VIX Spike to 60 Sets the Stage for a Rebound?

On April 7, the CBOE Volatility Index (VIX) posted a rare spike to 60, a level seen as a barometer of extreme market fear and uncertainty.

The Chained Consumer Price Index for March came in lower than expected, but Economists warn that the 'sticky' services inflation may still pose a challenge for the Fed to reach its 2% inflation target this year.

According to Benzinga, Economists polled by Dow Jones had anticipated a month-over-month increase of 0.3% and a year-over-year rise of 2.3% for the CCPI in March. In February, the index experienced a smaller-than-expected increase of 0.2% on a monthly basis and a decrease of 0.1% on an annual basis.

The CCPHI is an experimental price index that is used by the Bureau of Labor Statistics to measure the changes in prices paid by urban consumers for a typical market basket of consumer goods and services. It is a broad measure of inflation and is often used by economists to track the health of the economy.

The CCPHI is also used to adjust the value of the Consumer Price Index (CPI) for changes in the price level. This adjustment is important for ensuring that the CPI accurately reflects the changes in the purchasing power of consumers over time.

In addition to the CCPHI, the BLS also released several other price indexes today, including the PCE price index, which is the preferred measure of inflation used by the Federal Reserve. The BLS will also release the March employment report next Friday, April 7.

Here is a summary of the latest price indexes from the BLS:

* The Chained Consumer Price Index for March came in lower than expected, but Economists warned that the 'sticky' services inflation may still pose a challenge for the Fed to reach its 2% inflation target this year.

According to Dan Tapiero, CEO of 10Tfund, the VIX has hit 60 only five times in the last 35 years, and data suggests a rebound for risk assets such as Bitcoin (BTC) in 6 to 12 months.

The VIX, which is widely considered a “fear gauge,” reflects investor expectations of market turbulence based on S&P 500 options trading. As illustrated in the chart, extreme spikes were seen in 2008 and 2020, typically coinciding with market bottoms, where panic-driven sellers paved the way for generational market entries.

In light of that, Tapiero argued that the current spike is no different, with the worst of market fears likely "priced in," setting the stage for a positive future. Tapiero said that “odds favor better future.”

Likewise, Julien Bittel, head of macro research at Global Macro Investor (GMI), supported Tapiero’s claim and said that tech stocks are at their most oversold since the COVID-19 crash, with over 55% of Nasdaq 100 stocks posting a 14-day RSI below 30. Such a market signal has occurred only during major crises like the 2008 Lehman Brothers collapse and the 2020 COVID-19 pandemic.

Bittel explained that after the VIX touched 60 last week, it implied peak uncertainty, which breeds fear in investors’ minds. Briefly touching on the US Investors Intelligence Survey, Bittel compared the current bullish sentiment of 23.6% to the lowest reading since December 2008.

Additionally, the American Association of Individual Investors (AAII) survey respondents are currently 62% bearish, reflecting the highest bearish reading since March 2009. Bittel said,

This widespread fear, alongside a rare VIX spike, sets up for market entries in assets like Bitcoin, as the recovery of market liquidity will inevitably flow back into risk-on assets.

Analyst warns Bitcoin VIX trends are bearish

While macroeconomic experts highlighted the possibility of a bullish outcome for risk assets, markets analyst Tony Severino suggested that the Bitcoin/VIX ratio might also lead to a bear market. In a recent X post, Severino predicted that Bitcoin could have already peaked this cycle, but remained open about a possible change in opinion by the end of April.

As illustrated in the chart, Severino noted a sell signal at the beginning of January. The analyst used the Elliott Wave theory model to pinpoint the current bearish conditions and said that it is still early to say that Bitcoin will turn bullish based on the VIX correlation.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.