Bitcoin's Volatility Index Shows Record 90-Day Correlation with S&P 500 VIX

Bitcoin's implied volatility indices have reached a record high correlation of 0.88 with the S&P 500 VIX, indicating a strong link between BTC market dynamics and Wall Street. The correlation suggests that BTC's implied volatility is evolving into a fear gauge, similar to the VIX. Institutional participation and volatility selling are driving the collapse in BTC implied volatility and the resulting record correlation with the VIX.

Bitcoin's (BTC) market dynamics are increasingly intertwined with those of Wall Street, as indicated by a record-high correlation of 0.88 between BTC's implied volatility indices and the S&P 500 VIX. This correlation suggests that BTC's implied volatility is evolving into a fear gauge, similar to the VIX, which fluctuates with market sentiment [1].

The 90-day correlation coefficient between BTC's 30-day implied volatility indices—Volmex's BVIV and Deribit's DVOL—and the S&P 500 VIX reached this record high, according to data source TradingView. This correlation is a significant development, as it indicates a strong link between BTC and traditional financial markets.

Institutional participation in the crypto market, characterized by volatility selling, is driving this increased correlation. Volatility selling involves writing out-of-the-money (OTM) calls to generate additional income on top of spot market holdings. Some traders also write OTM puts. This strategy is being adopted by institutional players, who are actively compressing BTC's implied volatility [1].

Markus Thielen, founder of 10x Research, attributes the collapse in BTC implied volatility to institutional participation. "Rather than speculating directionally, many institutional players are selling call options to generate additional yield—mirroring traditional equity income strategies. As a result, directional flows tend to follow broader risk-on/risk-off dynamics familiar to legacy markets," Thielen told CoinDesk [1].

The BVIV has crashed from roughly 67% to 42% this year, moving in the opposite direction of BTC's price, which has risen by 26%. Historically, BTC and its implied volatility tended to move in tandem. Meanwhile, the VIX has dropped 11% this year, while the S&P 500 index has gained over 8% [1].

BitMine Immersion Technologies (NYSE: BMNR) has also been active in the crypto market. The company has launched options trading for its shares on the New York Stock Exchange and announced plans to acquire 5% of the global Ethereum (ETH) supply. This acquisition strategy positions BitMine as a major institutional holder, targeting a stake in the second-largest cryptocurrency by market capitalization [2].

The options listing follows a period of heightened speculation, with BitMine's stock price experiencing significant growth after announcing its shift toward Ethereum accumulation. However, the aggressive 5% target raises questions about execution risks, including competition from other institutional buyers and Ethereum's proof-of-stake dynamics [2].

The dual focus on Bitcoin mining and Ethereum accumulation distinguishes BitMine from peers, offering diversified exposure to crypto markets. The options listing is expected to attract both retail and institutional investors, providing hedging opportunities amid crypto’s inherent volatility [2].

References:
[1] https://www.coindesk.com/markets/2025/07/24/btc-volatility-index-and-the-s-and-p-500-vix-boast-record-90-day-correlation
[2] https://www.ainvest.com/news/ethereum-news-today-bitmine-launches-nyse-options-targets-5-ethereum-stake-177m-ark-funds-2507/