Using VIX Investment to Identify Bitcoin Bottoms: A 6-Stage Judgment Method

VIX investing is a method that uses the U.S. volatility index to determine market bottoms. The VIX data available for free on TradingView functions as an indicator that quantifies extreme market sentiment. Through years of testing, I have confirmed that this approach has very high accuracy via backtest data. Its effectiveness is especially pronounced during periods of extreme market sentiment deterioration.

Fundamentals of VIX Investing: Market Psychology Indicated by the Fear Index

The key to successful VIX investing lies in gradually understanding the level of market fear. Each stage presents different buying decision criteria, serving as a guide for investors. It’s not just a number but a tool to interpret shifts in market psychology.

When the VIX is low, it indicates a calm market; when high, it reflects widespread extreme fear. These psychological shifts significantly influence the success rate of buying risk assets like Bitcoin.

The 6-Stage VIX Investment Strategy: Buying Decisions at Each Level

Stage 1: VIX < 20
This range indicates a generally stable market. Price fluctuations are within normal bounds, and there’s no need to force purchases during this period. It’s considered an observation phase, with no strong recommendation for active intervention.

Stage 2: VIX 20–25
Signs of initial fear psychology emerge. While not necessarily the optimal buying point, it’s a stage worth monitoring more closely. Attention should be paid to assets in strong downtrends, serving as a preparatory phase.

Stage 3: VIX 25–30
Reaching this level is relatively rare. Market volatility often driven by specific events becomes prominent. For example, in 2025, the strike in October and tariff issues in November caused VIX to rise. After such events, rebounds are common, and it becomes possible to start building positions based on situational judgment.

Stage 4: VIX > 30
This is an infrequent level, indicating the market is facing relatively extreme incidents. It’s a phase where fear becomes more evident, and backtest data shows that buying success rates are particularly high at this stage.

Stage 5: VIX > 40
The market begins to spread bearish narratives. Our backtest data shows that Bitcoin investments within this range tend to be more stable. However, occurrences exceeding 40 are relatively limited.

Stage 6: VIX > 50
An extremely rare situation, such as in April 2025. During this period, the U.S. economic adjustment phase was underway, amplified by tariff wars with China. Historical data suggests that when VIX exceeds 50, there is a high probability of sharp short-term increases.

Backtest Evidence Confirming the Effectiveness of VIX Investing

The reliability of VIX investing is supported by multiple years of backtest data. Results show that the higher the VIX level, the more reliable the investment signals become, with success rates improving as VIX rises.

In particular, when VIX exceeds 30, its advantage over other indicators becomes clear. However, cases where VIX surpasses 50 are statistically limited, and further data is needed for full validation at this level.

Practical VIX Investment Guide: How to Use It in the Current Environment

If the current VIX level is in the observation phase, whether to buy or not depends on individual investment strategies. Generally, when VIX exceeds 25, especially over 30, it can be recognized as a more reliable investment opportunity.

In recent 2–3 years, occurrences of VIX over 30 have been relatively infrequent. Therefore, when implementing a VIX investment strategy, gradual position building and risk management tailored to each stage are crucial. Waiting for moments of extreme market sentiment deterioration allows for entries with a better risk-reward ratio.