How Bitcoin Price and Options Volatility Correlations Differ from Equities
Summary
This commentary compares Bitcoin’s spot-price and implied-volatility relationships with traditional assets and with Ethereum. Using rolling 90-day correlations, it reports that Bitcoin’s spot relationship with the S&P 500 and Nasdaq weakened from early 2023 and reached a low not seen since mid-2021. Bitcoin and Ethereum also posted strong year-to-date gains during the period discussed, while their options’ implied volatilities remained near the lower ends of their historical ranges.
The analysis distinguishes co-movement in prices from co-movement in expectations: Bitcoin implied volatility showed little correlation with the S&P 500 volatility index, despite a stronger historical link between spot prices. Bitcoin and Ethereum volatility had also become less correlated, even though their volatility fears had risen together during earlier stress such as the FTX collapse. These observations rely on historical rolling correlations and the authors’ implied volatility index. Correlation can change across windows and market regimes, and the commentary establishes no causal explanation or predictive trading edge.
Key ideas
- Bitcoin’s spot correlation with major U.S. equity indices declined during the period analyzed.
- Spot-price relationships do not imply that options-implied volatility will move together.
- Bitcoin and U.S. equity implied volatility showed little statistical correlation in the reported analysis.
- Bitcoin and Ethereum implied volatility became less correlated even as both volatility measures stayed historically low.
- Rolling correlations describe past relationships and do not establish causation or a reliable forecast.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.