VIX-Bitcoin Correlation Re-Emerges Amid Political and Financial Uncertainty

Bitcoin is struggling to regain strength below the $90,000 level as the market navigates a dense mix of high uncertainty and risk aversion. Price action remains hesitant, reflecting a broader environment where participants focus more on external signals than crypto-specific catalysts. According to data from CryptoQuant, this Big Wednesday comes with a strong market consensus: the Federal Reserve is widely expected to leave interest rates unchanged.

That expectation is reflected in volatile markets. The VIX at 16.89 puts equities in a moderate volatility zone, which is often interpreted as a warning level rather than an outright panic. However, despite stable rate expectations, the US dollar continues to weaken, highlighting that monetary policy is not the only driver shaping global currency flows.

The softening of the dollar is increasingly associated with the political and economic decisions associated with US President Donald Trump, which adds another layer of uncertainty to investors.

As US asset confidence falters, capital flows to perceived safe havens. This shift has fueled a renewed rally in gold and silver, underscoring a defensive stance across markets. In this context, Bitcoin’s inability to recover $90K shows its sensitivity to broader risk sentiment. Rather than acting as a quick refuge, BTC is still caught between extreme caution and the absence of a clear trigger, leaving the market in a fragile and reactive state.

According to the report, the VIX-BTC Risk Correlation becomes an important framework for interpreting Bitcoin’s behavior in the current macro environment. This indicator tracks how spikes in traditional market volatility, as measured by the VIX, coincide with local and cyclical lows in Bitcoin. Rather than acting as a timing signal, it acts as a stress thermometer, helping to gauge when the risks of traditional currencies start to translate into inflection points in the crypto market.

The historical context reinforces its relevance. In 2025, Bitcoin fell at 6 out of 7 FOMC meetings, with an average decline of 7.47% on surrounding days. Policy expectations remain firm, with the current federal funds rate in the range of 3.50%-3.75%, the lowest since September 2022. At the same time, the Federal Reserve announced plans to repurchase $40 billion in Treasury Bills over 30 days, adding liquidity without indicating an imminent rate cut.

On the volatile side, the VIX at 16.89 puts markets in a medium stress alert zone. Historically, this similar correlation pattern flagged Bitcoin’s last bottom of the current cycle and identified the bottom of the previous bear market.

The bottom line is not that the bottom is guaranteed, but that the risk remains high. As the markets reduce prices only in March or September, Bitcoin continues to trade in sync with the pressure driven by the US, which makes Wednesday another important test of volatility and the relationship of Bitcoin.

Price Momentum Remains Fragile

Bitcoin price action on the daily chart shows the market caught in a weak consolidation after a sharp correction phase. BTC is trading near $89,000, struggling to regain momentum after failing to recapture a bearish set of moving averages.

The 50-day SMA (blue) continues to move lower and serves as strong resistance, while the 100-day SMA (green) is also moving lower, reinforcing the medium-term bearish structure. Above them, the 200-day SMA (red) remains intact but far from the price, indicating that long-term trend support is still present, but not immediately active.

The sell-off from the October high established a clear low-high and low-low sequence, confirming the trend reversal from expansion to distribution. From the December lows near the $80,000s, the price has stabilized but remains below the $92,000–$94,000 area, where earlier demand has turned into resistance. Volume has eased during the recent sideways movement, suggesting reduced participation and a lack of conviction on the part of both buyers and sellers.

Structurally, this is a compression phase rather than a guaranteed regression. Holding above the $86,000–$87,000 support range is essential to avoid renewed pressure. However, without a decisive retracement of the 50- and 100-day averages, the upside efforts remain positive in nature.

The market is stalled, not settled, and the direction will depend on whether demand returns with volume or sellers regain control.

Featured image from ChatGPT, chart from TradingView.com

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