Crypto Lags Behind Equities as VIX Sparks Investor Anxiety

Stocks Surge to Record Highs While Crypto Trails, VIX Raises Caution Flags

U.S. equities hit new milestones on Monday, leaving major cryptocurrencies struggling to keep pace. The S&P 500 climbed to 6,519 points, marking a record high for the fourth straight trading day. The Nasdaq also reached all-time highs, while the Dow Jones hovered near last Thursday’s peak.

Equities shrugged off a bearish September manufacturing survey as bond yields dropped ahead of an expected 25-basis-point Federal Reserve rate cut on Wednesday. Fed funds futures suggest rates could fall from 4.25% to 3% over the next year, fueling the risk-on environment.

Crypto Struggles Amid Profit-Taking

Bitcoin (BTC) traded between $114,000 and $117,000, forming a Doji candle indicative of indecision. At the time of writing, BTC was at $115,860, well below the $124,000 record set in August. Analysts attribute the muted price action to profit-taking by long-term holders, counteracting bullish ETF inflows.

Other major tokens also lost momentum. Ether (ETH) fell from nearly $4,800 to $4,500 over three days, despite reaching all-time highs above $5,000 last month. XRP pulled back to $3.00, showing weak follow-through after last week’s breakout from a descending triangle. Dogecoin (DOGE) dropped sharply to $0.267 from $0.307, following reports of whale selling.

Analysts note that a 25-basis-point Fed cut could support a gradual BTC recovery, while a surprise 50-bps move might trigger volatility across stocks, crypto, and gold.

Volatility Measures Signal Caution

Monday’s equity rally coincided with a 6% rise in the VIX, the S&P 500’s implied volatility index, which reached 15.68 points. Although still near multi-month lows, the spike is notable. Historically, the S&P 500 and VIX move inversely, with a 90-day correlation near -90. Menthor Q notes that a breakdown in this negative correlation can precede market corrections.

“SPX rose with the VIX today, often signaling stretched upside positioning as traders buy calls or hedge with puts, leaving markets vulnerable,” Menthor Q said.

Bitcoin’s 30-day implied volatility, tracked by Volmex, also rose 3% Monday, maintaining a positive correlation with the VIX. However, BTC’s historical correlation with volatility indices has flipped negative since the launch of spot ETFs in January last year, diverging from traditional market patterns.

About The Author

ctleditor

See author's posts