Wall Street's fear gauge, the VIX index, ripped higher on Friday as stocks tanked on AI and geopolitical worries. Bitcoin traded choppy.
However, if VIX history and bitcoin’s steady weekend price action are any guide, the panic could subside just as quickly on Monday.
First, a quick primer. Cboe’s VIX measures how much traders expect the S&P 500, the blue-chip stock index, to swing over the next four weeks. It's derived from options prices. When people get nervous, they buy options, which are contracts used to hedge against price swings. That pushes the VIX up.
Bitcoin , meanwhile, is the only macro asset thats trades over the weekend. As such, swings in bitcoin over the weekend are often seen as lead indicators of how traditional markets may open on Monday.
On Friday, the VIX jumped 21.5% to 19.99 as the S&P 500 fell by 1.09%.
That's VIX’s biggest one-day rise since June 5, when the S&P 500 suffered its worst day in months, according to data source TradingView.
Traders are betting the VIX stays high through November. CNBC reports that traders bought 9,200 of the Nov. 18, 20-strike calls for $1.7 million. Traders also bought 12,500 of the Nov. 18, 23-strike calls for $1.1 million. The bet is that the VIX closes above 23 by the third week of November.
That sentiment is consistent with the present macro developments. AI stocks have been hit hard in the week gone by. The cost of default insurance on AI-related firms has hit record highs .
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