Volrelation

Spot Price Correlation

• BTC's correlation to equities, measured against both the S&P 500 and the tech-heavy Nasdaq 100, has been falling since early February this year
• It is now at the lowest level observed since July 2021, when BTC was between its twin peaks in April and November
• The fall in correlation has happened as both assets have retraced losses sustained throughout last year's tightening cycle
• However, BTC and ETH reported the highest returns YTD of all benchmarks consider returns YTD, at 86.2% and 62.6% respectively - with the NDX at "just" +39%

Block Scholes Implied Volatility Index

• Despite their market-dominating returns, the implied volatilities of BTC and ETH options has been trading near to the lower bound of their historic ranges
• The VIX, which measures the implied volatility of 1-month options on the S&P 500, is similarly pricing for near all time lows

Correlation of Vols

• Whilst their spot prices moved together for significant historical periods, expectations about future volatility of BTC and US equities asset have held little statistical relationship
• In contrast, we have seen fears of selloffs in ETH rise at the same time as fears about BTC selloffs, such as during the FTX collapse in November 2022
• However, at the same time as the beginning of the decoupling between BTC and equities in early 2023 (see Figure 2), we also see a reduction in the correlation between changes in BTC vol and those of ETH vol
• We have commented on the drop of ETH vol below that of BTC's over the same period in a previous volatility review