Experts in the market are getting more and more sure that both Bitcoin and the S&P 500 will rise in value by the end of the year. New volatility data, which is thought to be one of the best ways to predict the direction of a market, shows that both the traditional and crypto markets may be getting ready for a combined rise as the year ends. especially for Bitcoin and the S&P 500.
In the past week, volatility indexes for both Bitcoin and the S&P 500 have dropped by a large amount. This is to fix recent price spikes that were caused by fear. This change has made people feel better, made them more willing to take risks, and set both assets up for what might be a very bullish December.
Here’s a detailed look at why volatility is going down, how this affects the market, and what traders may expect as we head into the last few months of the year.
Volatility Measures Bitcoin and the S&P 500 are both flashing green.
Analysts who keep an eye on the latest data say that the drop in volatility is strong evidence of a bull market forming — especially for Bitcoin and the S&P 500 after recent ups and downs.
Important Things to Note:
It looks like Bitcoin’s expected volatility index has gone down a lot, which means that the price will be more stable and likely to rise — supporting a bullish case for Bitcoin and the S&P 500 together.
The VIX shows that the S&P 500’s volatility has also gone down, which makes people more willing to take risks.
Rate cuts by the Federal Reserve in December are much more likely to happen. This has calmed down panic-driven trade and lowered the demand for downside protection.
Both markets are beginning to rebound, and volatility is falling simultaneously — usually a reliable signal of bullish momentum for Bitcoin and the S&P 500.
Bitcoin's volatility reversal shows that it is getting stronger again.
Patterns in Bitcoin’s price changes can often give you a sign about what will happen next. This week, those trends changed a lot to help the bulls.
The BVIV index from Volmex, which looks at 30-day implied volatility, dropped back to 51%, after quickly rising to 65% immediately before November 21. This increase happened when the price of Bitcoin dropped from about $96,000 to almost $80,000 in just a few days.
Bitcoin, on the other hand, has bounced back and is presently trading above $91,000, which shows that there is an inverse relationship between BTC price and volatility. This negative association has been getting stronger since last year, which means that Bitcoin is acting more and more like a typical financial asset that is getting older.
Other measures of volatility, including Deribit’s DVOL, show the same pattern: a big increase followed by a quick cooldown. This is similar to what happens in traditional market volatility indices.
VIX Drops Below 20 Again, Showing That the Market Is Calm
The VIX, which measures the S&P 500’s main volatility, shot up to 28% on Wall Street in the days leading up to November 21. Investors were worried about a lot of things, like not knowing what rates would do and not having enough cash on hand.
But feelings changed fast.
The VIX has since gone back down to 17%, which means:
The panic is going away.
People are starting to trust the market again.
Traders are getting ready for the end of the year to be stronger.
If the VIX was below 20, it used to mean that stocks were likely to go up.
Both the stock market and Bitcoin are becoming less unpredictable at the same time, which is a good sign. Bitcoin has started to move more in line with larger trends.
The thought of a rate cut makes people more willing to take chances.
A big part of the reason for less instability is the Federal Reserve. People on the market now really want rates to drop by 25 basis points in December.
A week ago, the chance of a rate cut was only 39%. That chance is now about 87% higher.
The following things happen because of this change:
It makes fewer people want to buy Bitcoin put options, which traders use to protect themselves from losing money.
The markets are less volatile because people are less scared of them.
Traders are more willing to take chances again, which makes them want to buy stocks and cryptocurrencies.
Dr. Sean Dawson, who is in charge of studies at Derive, made it clear:
“Markets are on the edge of a knife, but sentiment has stabilized significantly as hopes for a rate cut continue to rise.”
It’s still expensive for buyers to protect against losses, but “noticeably less than last week,” he says. That means traders aren’t as scared as they used to be, so they don’t use defensive tactics as much.
Both Deribit and Derive now have -5% call-put skews. This is up from -7% to -10% last week. This is another sign that people don’t want to take as many risks.
Bitcoin's liquidity dynamics make the bullish case stronger.
Analysts say that Bitcoin and the S&P 500 both are influenced by Bitcoin’s decline in volatility, which is partly related to the “liquidity addiction” of the wider market, meaning it depends heavily on cheap borrowing costs and central bank policy.
In the past, the Fed has made a dovish move:
Raises the value of assets that are sensitive to liquidity
Increases the willingness to take risks in speculative situations
Works with both stocks and cryptocurrencies
Bitcoin’s rise back above $91,000 fits with its new behavior as a macro-driven asset instead of a standalone, sentiment-driven cryptocurrency in the current context — a trend also seen across Bitcoin and the S&P 500 during liquidity shifts.
Bitcoin looks like it could go up even more now that volatility is going down and liquidity is getting better, strengthening the outlook for Bitcoin and the S&P 500 as markets stabilize.
The Bottom Line: A Bitcoin and S&P 500 Rally That Happens at the Same Time Could Be Coming
The fact that both Bitcoin and the S&P 500 are becoming less volatile at the same time is one of the strongest signs yet of a likely bull run at the end of the year. Along with rising hopes for a Fed rate decrease in December, the market mood is clearly turning toward positivity.
If things keep going the way they are:
Bitcoin’s comeback could last longer.
The S&P 500 might challenge or shatter recent highs again.
Both markets could profit from a revived appetite for risk.
For traders, the next several weeks might be quite good for business, as long as volatility stays low and central bank forecasts keep positive.