Pair traders seeking an advantage may want to pay attention to a lesser-known indicator related to bitcoin and the S&P 500.
This indicator measures the spread between Volmex’s BVIV – the 30-day implied volatility index for BTC – and the VIX index for the S&P 500. Recently, this spread has begun to widen again, indicating that BTC volatility is anticipated to surpass that of the equity market.
Implied volatility is shaped by the demand for options and hedging instruments.
“When the BVIV-VIX spread expands, it generally indicates that traders expect greater volatility in crypto compared to equities,” said Volmex’s Founder Cole Kennelly to CoinDesk. “The crypto options markets tend to adjust more swiftly to liquidity shifts and macroeconomic factors, so implied volatility often leads traditional markets.”
The spread has recently emerged from a months-long trend between 20.000 and 32.000 and has broken the downtrend established since the peak in March 2024. These trends suggest that BTC may experience more volatility than the S&P 500 in the days ahead.
The potential for BTC’s volatility to become comparatively greater than that of the S&P 500 might encourage pair traders to explore contrasting volatility bets on BTC and the S&P 500.
“Whenever the BVIV–VIX spread significantly widens, some traders interpret it as a relative value opportunity: crypto implied volatility has either become cheaper or more expensive relative to equity volatility. This perspective is often expressed through multi-legged cross-asset volatility trades, rather than straightforward directional positions,” Kennelly elaborated.
Trading volatility is a capital-intensive strategy that involves betting on price fluctuations rather than directionality, usually employing non-directional options or volatility futures.
These strategies are inherently risky, akin to other trading methods, and necessitate ongoing position monitoring and significant capital, making them primarily suitable for institutional investors.
