VIX Soars to 60: Market Opportunities and Risks Amid Historical Extremes

The escalation of global trade conflicts in 2025 triggers market turmoil

Recently, the U.S. government announced a tariff of at least 10% on global goods and imposed higher rates on about 60 countries with significant trade deficits. This move has caused panic in global markets, mainly due to the following reasons:

  1. Rising corporate costs and declining profit expectations
  2. Global supply chains are disrupted, and economic uncertainty is increasing.
  3. Possible retaliatory tariffs may escalate the scale of the trade war.

In this environment, market participants tend to:

  • Reduce the allocation of risky assets such as stocks and cryptocurrencies (
  • Increase the allocation of hedging assets ) such as gold, US dollars, and yen (
  • Increased volatility expectations lead to a rise in the VIX index

The chain reaction triggered by the tariff hike ultimately led to a spread of panic in the market.

The Panic Index VIX soared to 60 on April 7, reaching an extreme historical level. Similar situations have only occurred three times in the past, with the last happening on August 5, 2024, and the earliest during the COVID-19 pandemic in 2020.

The current VIX index is at a historically rare high. In the face of such extreme conditions, how can we use the VIX index to predict market trends?

Introduction to the VIX Index

The VIX index is calculated based on the prices of S&P 500 index options to measure the expected volatility in the market over the next 30 days, and is considered an indicator of market uncertainty and panic.

In short, a higher VIX indicates that the market expects more severe fluctuations in the future and stronger panic emotions; a lower VIX suggests a calm market with higher confidence. Historical experience shows that the VIX usually spikes during significant stock market declines and falls back when the market stabilizes and rises. Due to this inverse relationship with the stock market, the VIX is also referred to as the "fear index" or a thermometer of market sentiment.

The VIX is generally considered to be at a normal level when it is below 15-20; exceeding 25 indicates that the market is starting to show obvious panic; and exceeding 35 is considered extreme panic. In extreme crisis events, the VIX may even break 50, reflecting extreme risk aversion in the market. Therefore, observing changes in the VIX can provide insights into the current strength of market risk aversion, serving as a reference for adjusting investment strategies.

) High Volatility Panic Zone: VIX ≥ 30

When the VIX rises above 30, it usually indicates that the market is in a state of high fear or panic. This situation is often accompanied by a sharp decline in the stock market, but historical data shows that after extreme panic, the market often rebounds.

Between 2018 and 2024, there were about a dozen events where the VIX closing price rose above 30 for the first time, including the volatility storm in February 2018, the sell-off on the eve of Christmas in December 2018, the pandemic panic in February-March 2020, the retail storm at the beginning of 2021, and the interest rate hikes and geopolitical conflicts at the beginning of 2022.

Statistics show that within 7 days after these panic events, the S&P 500 index averages an increase of about 1.4%, with a probability of approximately 73% of rising. This indicates that when the VIX spikes above 30, the stock market tends to experience a technical rebound in most cases in the short term.

Bitcoin tends to rebound strongly after extreme panic. Data estimates that the average 7-day increase of BTC is about 10%, with a win rate of around 75-80%. For example, in February 2022, when the VIX surged above 30 due to a geopolitical crisis, Bitcoin subsequently rose over 20% in the following week, demonstrating a rebound similar to the stock market's easing of risk aversion.

Extreme Panic Peak: VIX ≥ 40

During the period from 2018 to 2024, extreme panic situations where VIX ≥ 40 are extremely rare, occurring only on February 5, 2018, and February 28, 2020. In March 2020, the VIX skyrocketed to an unprecedented 82 points.

Due to the extremely small sample size, the statistical results are for reference only: After the event in 2020, the S&P 500 slightly rebounded by about 0.6% within 7 days. The market was highly volatile that week but showed a slight technical rebound, while BTC rose by about 7%. Overall, when the VIX reaches a historical extreme of over 40, it often indicates that the market's extreme panic selling pressure is nearing its peak, resulting in a relatively high opportunity for a short-term rebound. From a larger cycle perspective, these points in time are usually relative lows.

Low Volatility Range: VIX ≤ 15

When the VIX falls below 15, it typically indicates that the market is in a relatively calm state, investor sentiment is more optimistic, and there is low demand for hedging. However, the subsequent trend is not as clearly consistent as when the VIX is high.

The VIX dropped below 15 multiple times between 2018 and 2024, such as after a strong rebound in the stock market in early 2019, during the market stabilization period at the end of 2019, during the upward phase of the stock market in mid-2021, and in mid-2023. During these periods, market volatility was at historically low levels.

Statistics show that in the 7 days following an event point with a very low VIX, the S&P 500 has an average increase of about 0.8%, with a win rate of about 60-75%. Overall, stock indices tend to maintain a gradual upward trend or slight fluctuations in a low volatility environment. For example, in the week following the VIX dropping below 15 in October 2019, the S&P 500 remained stable and slightly set new highs; in July 2023, when the VIX was around 13, the index continued to rise gradually by about 2% in the following week.

This indicates that a low VIX does not necessarily lead to an immediate pullback, and the market may continue to rise for a period of time. However, it is important to be cautious, as extremely low volatility often implies market complacency, and once faced with unexpected negative news, volatility and declines may significantly amplify.

The price movement of Bitcoin during low VIX periods lacks clear direction. Statistics show that its 7-day average increase is only about 2%, with an upward probability of around 60%. Sometimes, low VIX calm periods coincide with BTC's own bull market phases (such as in the spring of 2019), but at other times, low VIX periods see BTC experiencing pullback trends (such as in early 2018). Therefore, the predictive reference value of low VIX for BTC's subsequent movements is not obvious and must be considered in conjunction with the capital sentiment and cycles of the crypto market itself.

Taking the tariff war as an example, interpreting the relationship between the panic index and the trend of risk assets

Summary: Risks and Opportunities Coexist

When the VIX soars to the 30-40 range:

  • Short-term trading may carry risks, but it also contains potential reversal opportunities.
  • BTC usually drops in sync during panic selling, but as panic subsides, the excessive short positions accumulated from the sell-off can easily trigger a strong technical rebound.
  • If the VIX starts to peak and fall back from 35 to slowly below 30, it may be a potential short-term buying opportunity for BTC.
  • The severity of the event itself must be assessed simultaneously; if a significant financial risk erupts, the market may continue to decline.

When VIX ≥ 40:

  • Indicate that the market is in extreme panic, which may lead to liquidity exhaustion, large capital withdrawals, and other situations.
  • The probability of a short-term drop in BTC is extremely high, but often if the panic eases a bit after a week or two, the rebound of BTC could be quite astonishing.
  • In this environment, it is advisable for speculators to maintain high risk control and strictly adhere to stop-losses, as "licking blood on a knife's edge" comes with both profit and risk.
  • From a long-term perspective, these points in time are usually relative lows.

When VIX ≤ 15:

  • The market is generally in a natural state. The trend of BTC relies more on the cycles of the crypto market itself, funding conditions, or technical factors.
  • In an overly calm environment, be wary of sudden changes or black swan events that may cause the VIX to rise sharply, and BTC may also follow with a correction.
  • Consider retaining some cash/stablecoins as a backup during this period and closely monitor risk factors.

When VIX is in the middle range of 15-30:

  • Generally regarded as the "normal fluctuation" range. BTC is also affected by the cryptocurrency cycle and macro funding conditions, at which point the VIX can serve as a supplementary indicator.
  • If the VIX rises from above 20 to close to 30, it indicates an increase in panic sentiment, and one should moderately guard against risks; conversely, if the VIX gradually drops from 25 to below 20, it shows that panic is easing, and the BTC trend may be relatively stable.

Currently, the VIX is at 50, and in the face of uncertainties regarding U.S. tariff policies, market sentiment remains in an extreme state of panic. However, opportunities often arise from despair.

Looking back at the pandemic period in 2020, the VIX peaked above 80, while the S&P 500 was around 2,300 points. Even after experiencing a recent panic sell-off, the S&P 500 remains near 5,000 points, with an increase of over 100% in five years. During the same period, Bitcoin was at an excellent buying point, rising from $4,800 to a high of $110,000 in this bull market, with a peak increase of nearly 25 times.

Every major drop is often accompanied by market repricing and capital flow. Whether it is possible to take this opportunity for leapfrog development is the key challenge at this stage.

![Taking the tariff war as an example, interpreting the relationship between the panic index and the trend of risk assets]###https://img-cdn.gateio.im/webp-social/moments-a4fdcbd2d2b15a0eb18922ba54a13eb9.webp(

BTC0.63%
View Original
This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.
  • Reward
  • 7
  • Repost
  • Share
Comment
0/400
GasFeeNightmarevip
· 08-15 12:55
Both rise and fall means not dying, it’s infuriating.
View OriginalReply0
TokenStormvip
· 08-14 10:43
VIX has broken 60 and you still don't go all in on gold? The scent of big short positions...
View OriginalReply0
DeFiAlchemistvip
· 08-14 10:27
the vix charts rn are painting ancient fibonacci patterns... time to transmute panic into yield opportunities tbh
Reply0
AirdropHunter420vip
· 08-13 04:37
play people for suckers and that's it, don't say anything else
View OriginalReply0
CafeMinorvip
· 08-13 04:36
It's a mess again.
View OriginalReply0
ProbablyNothingvip
· 08-13 04:21
Another round of Be Played for Suckers is here.
View OriginalReply0
AllInDaddyvip
· 08-13 04:10
It's time to take another shot, right?
View OriginalReply0
Trade Crypto Anywhere Anytime
qrCode
Scan to download Gate app
Community
English
  • 简体中文
  • English
  • Tiếng Việt
  • 繁體中文
  • Español
  • Русский
  • Français (Afrique)
  • Português (Portugal)
  • Bahasa Indonesia
  • 日本語
  • بالعربية
  • Українська
  • Português (Brasil)