Bitcoin: the index that can anticipate the price movements of BTC

There is an index that seems to be able to help identify some movements in the price of Bitcoin in advance. 

At the base of this (inverse) correlation, however, there is no clear dynamic, but only the observation that in the past it has already happened several times that a movement in one direction of this index was followed a few days later by a movement in the opposite direction of the price of Bitcoin. 

This, for example, also happened this week. 

Therefore, monitoring this index does not provide certainty regarding the future movements of the Bitcoin price, but in certain situations, it can give some additional indication.

MOVE: the index that can anticipate the price of Bitcoin (BTC)

This is the so-called MOVE index, which is the U.S. Bond Market Option Volatility Estimate Index.

It is an index that measures daily volatility in the American bond market.

This index was originally devised by Merrill Lynch to measure fear in the U.S. bond market. 

For the stock market, there is another volatility index, the famous VIX, while for the bond market, there is the MOVE. 

In 2019 the Merrill Lynch Option Volatility Estimate became the ICE BofAML U.S. Bond Market Option Volatility Estimate Index, while still retaining the acronym MOVE. 

In particular, it measures the volatility on options traded on US Treasury Bonds. It is used as a parameter to monitor the perception of risk and to understand how the sentiment of operators in the US bond market tends to move. 

Technically, it tracks the movement of the implied volatility of the returns of the 2, 5, 10, and 30-year US Treasury from the 1-month option prices.

What is the purpose of the MOVE index

Since the implied volatility corresponds to the cost of insurance, the MOVE also measures the willingness of investors to purchase risk insurance. Therefore, the lower it is, the lower the demand for protection from risks. 

This index was created in the 1990s to provide a signal of the change in risk sentiment in the fixed income market.

In particular, unlike the VIX, the MOVE index can increase even if the underlying (the Treasury) moves in both directions. The VIX, on the other hand, usually increases when the S&P 500 index drops significantly. 

However, since it is not an infallible indicator, the MOVE index cannot be considered a predictive index, so much so that it is not closely followed by bull and bear market operators. 

The values of this index tend to move between 80 and 120, with 80 representing a situation of substantial absence of fear, while 120 represents a sentiment of extreme fear. However, movements towards the extremes are quite rare. 

The apparent inverse correlation with the price of Bitcoin

The apparent inverse correlation between the trend of the MOVE index and the price of Bitcoin was discovered by the journalist from Sole 24 Ore, Vito Lops.