Bond Volatility Surges as Bitcoin and Wall Street Remain Calm

Bond market volatility has climbed to its highest level since March, while bitcoin’s BVIV and Wall Street’s VIX remain close to their respective yearly lows. The bond market is signaling growing risks that have not yet been reflected in bitcoin or U.S. equities.

The MOVE index, which measures expected volatility in U.S. Treasury markets, jumped from roughly 80 on Tuesday to 104 on Thursday. According to CoinDesk data, that is its highest level since March, when the index reached 199.

Bitcoin options markets remain relatively subdued. Volmex’s annualized 30-day Bitcoin Implied Volatility Index (BVIV) is around 37, close to its year-to-date low of 35. The gauge measures how much volatility bitcoin options traders expect over the next four weeks.

The Cboe VIX, which tracks expected volatility in the S&P 500, is also hovering near its year-to-date low of 14. Neither bitcoin nor U.S. stocks is showing the same increase in demand for volatility seen in Treasury markets.

The gap between the markets points to continued resilience in bitcoin and equities. Because Treasury securities underpin global financing and credit markets, a rise in bond volatility can tighten financial conditions and make investors less willing to take risk.

Rising Yields Add to Bond-Market Pressure

The divergence has emerged as government bond yields have climbed across major markets. Higher oil and diesel prices caused by the war in the Middle East are complicating the inflation outlook and raising uncertainty over how much further central banks may need to tighten monetary policy.

The U.S. 10-year Treasury yield briefly reached 5.2% Thursday before retreating to 5.163%.

When the MOVE index last traded around current levels in March, the S&P 500 was near 6,350. The index has since climbed to 7,704, representing an increase of roughly 21%. Bond traders, however, are now paying substantially more to hedge against interest-rate volatility.

The relationship between bond volatility and other major volatility gauges has also shifted. Over a 20-day period, the correlation between the VIX and MOVE fell to −0.06, turning negative for the first time since April 2024, although the reading remains close to zero.

The relationship between BVIV and MOVE is more pronounced, with the correlation at −0.37, among its lowest readings in years. In other words, Treasury volatility has increased while expected bitcoin volatility has remained close to its yearly floor.

As CoinDesk reported earlier this week, higher Treasury yields by themselves have not shown a consistent relationship with bitcoin returns.