Brace for Impact: Bitcoin’s August Volatility Surge Looms as VIX Seasonality Flashes Bullish Signals

Strap in, crypto traders—August is about to get wild.

The VIX's historical August seasonality is screaming one thing: Bitcoin's price is primed for explosive swings. And this time, the bulls might just have the upper hand.

Why August bites back

Market veterans know August as the month where liquidity dries up and algos start throwing punches. With traders sipping cocktails in the Hamptons, thin volumes turn minor tremors into full-blown quakes. The VIX—Wall Street's fear gauge—has a nasty habit of spiking this time of year.

Bitcoin eats volatility for breakfast

While traditional markets panic over 2% moves, BTC treats 20% swings like a morning coffee. This August, the king crypto's inherent volatility could supercharge the VIX's seasonal tendencies—creating the perfect storm for traders who thrive on chaos.

The cynical take: Of course institutional desks are talking up volatility now—their quants need something to justify those seven-figure bonuses after a boring Q2. But make no mistake: When the VIX speaks this loudly, even the most jaded crypto OGs pay attention.

One thing's certain: The next 30 days will separate the diamond hands from the paper portfolios. Time to check those leverage levels—or better yet, grab some popcorn.

What to know

• The CBOE's Volatility Index (VIX) is likely to rise in August, following a historical pattern of increased volatility.

• Bitcoin's market behavior is closely linked to Wall Street sentiment, particularly in technology stocks, and may be affected by the expected VIX surge.

Bitcoin volatility bulls may soon get their wish because seasonal patterns in Cboe's Volatility Index (VIX) suggest Wall Street is poised for increased turbulence.

The VIX measures the anticipated 30-day swings of the S&P 500 benchmark. Its historical pattern, according to Barchart.com, shows a frequent August surge, often preceded by a decline in July.

August stands out as having the highest average monthly gain, 13.68%, over the past 15 years, rising in 10 of those years, including a monumental 135% spike in 2015.

VIX's seasonality (2010-2024). (Barchart.com)

History repeating itself?

The VIX fell for a third straight month in July, extending the slide from April highs. It hit a five-month low of 14.92 on Friday, according to data source TradingView.

If history is a guide, this decline is likely setting the stage for the August boom in volatility and risk aversion on Wall Street. The VIX, which has been nicknamed the Fear Gauge, spikes higher when stock prices decline and falls when they rise.

In other words, the expected volatility boom on Wall Street could be marked by a stock market swoon, which could spill over into the Bitcoin market.

Average daily level of VIX (1990-2024). (Topdown Charts, LSEG)

Bitcoin tends to track the sentiment on Wall Street, especially in the technology stocks, fairly closely. BTC's implied volatility indices have developed a strong positive correlation with the VIX, signaling a steady evolution into VIX-like fear gauges. Since November, BTC's 30-day implied volatility indices have declined sharply, ending the positive correlation with the spot price.