The shift from positive correlation comes amid concerns the looming $3 billion FTX liquidations will crater the crypto market.
The correlation between bitcoin and its implied volatility has turned negative again, indicating investor concerns about moves to the downside.
The 60-day trailing correlation between bitcoin's price and implied volatility flipped negative a week ago and fell to -0.29 early Tuesday, according to Velo Data. "The market has spent the last few months preparing for a potential ETF approval and has thus been very concerned about asymmetric moves to the topside." Jeff Anderson, a senior trader at STS Digital, told CoinDesk."That sentiment has shifted recently with the FTX liquidation news and fears that the bottom could fall out of the spot price. As such, the implied volatility has gone bid with spot prices moving in an area of perceived weakness.
"That has pushed up investors' preference for puts, bringing a negative correlation between prices and volatility," Ardern added.
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