The escalation of the global tariff war has caused market turmoil, with the VIX index soaring to historical highs.

In 2025, the global trade landscape will undergo significant changes. A certain country's government announced a tariff of at least 10% on goods from the vast majority of countries, and will implement higher rates on about 60 countries with large trade deficits. This policy has triggered panic in global markets, with the main reasons including:

1. Increased business costs and declining profit expectations
2. The global supply chain is disrupted, and economic uncertainty is increasing.
3. It may trigger retaliatory tariffs from other countries, increasing the risk of a trade war.

In this environment, investors tend to behave:

• Reduce allocation to high-risk assets such as stocks and cryptocurrencies
• Increase holdings in safe-haven assets such as gold, USD, and JPY.
• Expected market volatility increases, leading to a rise in the VIX index.

The chain reaction of tariff policies has led to rising costs, supply chain disruptions, increased retaliation risks, decreased investment willingness, and the flow of safe-haven funds, ultimately triggering market panic.

On April 7th, the panic index VIX surged to 60, reaching a historic high. This is an extremely rare occurrence, previously only seen at similar levels on August 5, 2024, and during the COVID-19 pandemic in 2020. Currently, the VIX index has reached an extreme level in history.

So, how can we use the VIX index to predict market trends?

Introduction to the VIX Index

The VIX index is calculated based on the prices of S&P 500 index options and reflects the market's expectations of volatility over the next 30 days. It is considered an important indicator of market uncertainty and panic.

In short, the higher the VIX, the more it indicates that the market expects greater volatility in the future and stronger panic sentiment; conversely, a lower VIX means a calmer market and stronger confidence. Historical data shows that the VIX usually spikes during major stock market declines and falls back when the stock market stabilizes during an upward trend. Due to this inverse relationship with the stock market, the VIX is referred to as the "fear index" or the market's sentiment barometer.

The normal level of VIX is below 15-20, which is considered a relatively calm range for the market. When VIX exceeds 25, it indicates that the market is starting to panic significantly; exceeding 35 indicates a state of extreme panic. During extreme crisis events (such as financial crises or outbreaks of pandemics), the VIX index may even break 50, reflecting that the market is in a state of extreme risk aversion. Therefore, by observing the changes in VIX, investors can gain insights into the current strength of risk aversion in the market, serving as a reference for adjusting investment strategies.

Market Performance at Different VIX Levels

High Volatility Panic Zone: VIX ≥ 30

When the VIX index rises above 30, it usually indicates that the market is in a state of high fear or panic. This situation is often accompanied by sharp declines in the stock market, but historical data shows that markets often rebound after extreme fear.

Between 2018 and 2024, there were about a dozen events when the VIX closing price rose above 30 for the first time, including the volatility storm in February 2018, the year-end sell-off in December 2018, the pandemic panic in February-March 2020, the retail trading frenzy in early 2021, and the interest rate hikes and geopolitical conflicts in early 2022.

Statistics show that in the 7 days following these panic events, the S&P 500 index averaged an increase of about 1.4%, with approximately a 73% probability of rising 7 days after the event. This indicates that when the VIX spikes above 30 (the panic zone), the stock market usually experiences a technical rebound in the short term.

Bitcoin tends to rebound strongly after extreme panic. Data estimates that the average 7-day increase in Bitcoin is around 10%, with a win rate of about 75-80%. For example, in February 2022, when the VIX surged above 30 due to geopolitical crises, Bitcoin rose more than 20% in the following week, demonstrating a rebound phenomenon similar to the easing of risk aversion in the stock market.

Extreme Panic Peak: VIX ≥ 40

When the standard is further raised to VIX ≥ 40 (extreme panic), qualifying events were extremely rare between 2018 and 2024. In fact, it only occurred on February 5, 2018, and during the market crash on February 28, 2020, triggered by the pandemic, which caused the VIX to close above 40 (for the first time in four years). Subsequently, the VIX soared to an unprecedented 82 points in March.

Due to the extremely small sample size, the statistical results are only for reference: after the event in 2020, the S&P 500 slightly rebounded by about 0.6% within 7 days (the market was highly volatile that week but saw a slight technical rebound), while Bitcoin rebounded by about 7%. Overall, when the VIX reaches a historical extreme value above 40, it often indicates that market panic selling pressure is nearing its peak, and there is a relatively high chance of a short-term rebound, which usually corresponds to a relative low point in a larger cycle.

Low Volatility Range: VIX ≤ 15

When the VIX index falls below 15, it usually indicates that the market is in a relatively calm state. Investor sentiment is more optimistic, and the demand for hedging is low. However, the subsequent trend at this time is not as clearly consistent as when the VIX is high.

Between 2018 and 2024, the VIX fell below 15 multiple times, such as after a strong rebound in the stock market in early 2019, during a stable period at the end of 2019, during an upward trend in the stock market in mid-2021, and around mid-2023. During these periods, market volatility was at historically low levels.

Statistics show that in the 7 days following events with extremely low VIX, the average return of the S&P 500 is approximately +0.8%, with a win rate of around 60-75% (slightly above random probability). Overall, stock indices tend to maintain a gradual upward trend or small fluctuations in a low volatility environment.

The price movement of Bitcoin during low VIX periods lacks clear directionality. Statistics show that its 7-day average increase is only about +2%, with a win rate of about 60%. Sometimes, the calm period of low VIX coincides with Bitcoin's own bull market phase; however, there are also times when Bitcoin experiences a correction during low VIX periods. Therefore, the predictive reference value of low VIX for Bitcoin's subsequent movements is not obvious and must be considered in conjunction with the capital sentiment and cycles of the cryptocurrency market itself.

Conclusion: Risks and Opportunities Coexist

When the VIX soars to the 30-40 range, there may be risks in the short term, but it also contains potential reversal opportunities. Bitcoin usually declines in sync with panic selling pressure, but as the panic sentiment eases, the excessive short selling that has accumulated is likely to trigger a strong technical rebound. If we observe the VIX starting to peak and decline (slowly returning from 35 to below 30), it could be a potential time to buy Bitcoin in the short term.

When VIX ≥ 40, it indicates that the market is in extreme panic, with possibilities of liquidity exhaustion and large-scale capital withdrawal. The probability of a significant short-term drop in Bitcoin is very high, but often if the panic eases slightly after a week or two, the expected rebound in Bitcoin will also be relatively astonishing. In this environment, it is advised for short-term speculators to maintain high risk control and strictly adhere to stop losses. From a long-term perspective, this is usually a relatively low point.

When VIX ≤ 15, the market is generally in a natural state. Whether Bitcoin rises often depends more on the cycles of the crypto market itself, the liquidity, or technical trends. In an overly calm environment, be aware that once unexpected changes or black swan events occur, VIX may rise rapidly, and Bitcoin could also follow suit with a correction.

The mid-range of VIX 15-30 is generally regarded as the "normal volatility" range. Bitcoin is similarly influenced by the cryptocurrency cycle and macro liquidity conditions, in which case VIX can serve as a supplementary indicator. If VIX rises from above 20 to near 30, it indicates that panic is starting to set in, and there is a need to moderate risk prevention; conversely, if VIX gradually falls from 25 to below 20, it shows that panic is diminishing, and Bitcoin may be relatively stable.

Currently, the VIX is at 50, and with the uncertainty of tariff policies, market sentiment remains in a state of extreme panic. However, opportunities often arise from despair. Looking back at the pandemic period in 2020, the VIX peaked above 80, while the S&P 500 was around 2300 points. Now, even after the panic sell-off, it remains near 5000 points, achieving over 100% return in five years. During the same period, Bitcoin was at an excellent buying point, rising from $4800 to a peak of $110,000, an increase of nearly 25 times.

Every major drop is often accompanied by market repricing and capital flow, and chaos may become a stepping stone for growth. Whether this opportunity can be leveraged for leapfrog development is a key challenge faced by investors in the current market environment.