What is VIX? The fear index that Bitcoin investors should know to determine market bottoms

VIX refers to the U.S. stock market volatility index and serves as a barometer that quantifies market fear levels. This data, which can be accessed for free on TradingView, has been utilized by many investors over the years. Backtesting results have demonstrated that, especially during periods of extreme market sentiment deterioration, VIX is a highly effective indicator for determining optimal Bitcoin investment timing.

Understanding VIX: Visualizing Market Fear Psychology

What exactly is VIX? It is not merely a measure of stock price fluctuations but a numerical representation of market participants’ psychological state, particularly the levels of anxiety and fear. A low VIX indicates a calm market, while a high VIX suggests heightened investor fear.

In the context of Bitcoin investing, VIX functions as a signal of overall market sentiment reversal. Since stock market movements often correlate with Bitcoin’s price action, tracking VIX fluctuations allows early detection of turning points in the cryptocurrency market.

Investment Decision Criteria by VIX Levels: Six-Stage Timing for Buying

Analyzing VIX levels in stages is crucial for developing an investment strategy.

Stage 1: VIX < 20
This range indicates a normally functioning market. Prices fluctuate within typical bounds, and no special investment signals are present.

Stage 2: VIX 20–25
This marks the beginning of a fear sentiment. Downward pressure starts to increase, making it a period to observe relevant assets. However, this stage alone does not necessarily represent the optimal bottom, and waiting for higher VIX levels is also a valid strategy.

Stage 3: VIX > 25
This level is relatively rare and often driven by event-related volatility. For example, in October and November 2025, different events (strikes and tariff issues) occurred, and market rebounds were often observed after these events concluded. At this stage, decisions to open new positions based on situational judgment are possible.

Stage 4: VIX > 30
This is an even rarer situation, often indicating significant market shocks. It reflects a clear increase in fear, and backtest data shows a relatively high success rate for buying during this phase.

Stage 5: VIX 30–40
This stage suggests a shift from bullish to bearish sentiment. Bearish market narratives begin to spread, creating opportunities to increase investment. Backtest results confirm that Bitcoin investments within this range tend to be highly stable.

Stage 6: VIX > 50
An extremely rare scenario, observed recently in April 2025, caused by overlapping U.S. policy adjustments and tariff conflicts with China. Historical backtest data indicates that when VIX exceeds 50, rapid upward trends often occur in a short period.

Effectiveness of VIX-Based Investment Strategies from Backtest Data

While VIX is a simple indicator, its predictive accuracy is supported by long-term data. Notably, when VIX exceeds 25 and especially 30, there is a strong correlation with subsequent market rebounds.

However, in the past two to three years, opportunities when VIX surpasses 30 have been infrequent. For investors, leveraging these rare signals effectively is key.

Current Market Environment and Investment Judgment

Currently, the VIX stands at 22.56, placing it in the observation zone. Investment decisions to buy within this range depend largely on individual strategies. More reliable opportunities tend to emerge when VIX exceeds 25, particularly beyond 30.

VIX acts as a mirror of market psychology; monitoring this index enables more objective judgment of the optimal timing for asset investments, including Bitcoin.