Tariff policies trigger turmoil in global markets, VIX index soars to historical highs

In 2025, the global trade situation deteriorated sharply. The Trump administration announced a tariff of at least 10% on goods from the vast majority of countries and imposed higher rates on approximately 60 countries with the most severe trade deficits with the United States. This decision triggered panic in the global markets, mainly due to the following reasons:

• The increase in tariffs has led to higher costs for enterprises and a decline in profit expectations.
• Global supply chains are disrupted, and economic uncertainty is increasing.
• May trigger retaliatory tariffs from other countries, expanding the scale of the trade war.

In this environment, the behavior of capital market participants tends to be conservative:

• Reduce allocation to risky assets (such as stocks, cryptocurrencies)
• Increase allocation to safe-haven assets (such as gold, USD, JPY)
• Expectations of increased market volatility have led to a surge in the VIX index.

The ripple effect of tariff policies has led to rising costs, disrupted global supply chains, increased risks of retaliation, investors adopting a wait-and-see approach, and a flow of safe-haven funds, ultimately triggering market panic.

The Panic Index VIX skyrocketed to 60 on April 7, a level that is extremely rare. Historically, values this high have only occurred three times, the last time being on August 5, 2024, and the earliest during the COVID-19 pandemic in 2020.

The current VIX index has reached historically extreme levels. In light of this situation, how can we use the VIX to predict market trends?

VIX Index Analysis

The VIX index is calculated based on the prices of S&P 500 index options to derive the expected volatility of the market over the next 30 days, and is considered an important indicator of market uncertainty and panic sentiment.

In short, the higher the VIX, the more the market expects future volatility to be severe, indicating stronger panic; the lower the VIX, the calmer the market, reflecting higher confidence. Historical experience shows that the VIX usually spikes when the stock market plummets and retreats when the stock market rises and stabilizes. Due to this inverse relationship with the stock market, the VIX is also known as the "fear index" or the market's emotional thermometer.

The normal level of VIX is around 15-20, which is considered a calm range; when VIX rises above 25, it indicates that the market begins to show obvious panic; exceeding 35 is considered extreme panic. In extreme crisis events (such as financial crises or pandemics), the VIX index can even soar above 50, reflecting extreme risk-averse sentiment in the market. Therefore, by observing changes in VIX, investors can gain insight into the strength of current market risk-averse sentiment, serving as a reference for adjusting investment allocations.

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 the market often rebounds after extreme fear.

Between 2018 and 2024, there have been about a dozen occurrences where the VIX closing price rose above 30, with typical situations including the volatility storm in February 2018, the pre-Christmas sell-off in December 2018, the pandemic panic in February-March 2020, the retail investor storm at the beginning of 2021, and the interest rate hikes and geopolitical shocks in early 2022.

Within seven days after these panic events occur, the S&P 500 tends to experience a positive rebound. Statistics show an average increase of about 1.4%, with approximately a 73% chance of rising after the event within seven days. This indicates that when the VIX soars above 30 (the panic zone), the stock market will most likely experience a technical rebound in the short term.

Bitcoin tends to rebound strongly after extreme panic. Statistics estimate that the average 7-day increase in BTC is about 10%, with a win rate of around 75-80%. For example, in February 2022, when the VIX rose above 30 due to geopolitical crises, Bitcoin surged over 20% in the following week, demonstrating a rebound phenomenon similar to the decline in 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 during the period from 2018 to 2024. In fact, only February 5, 2018, and the crash triggered by the pandemic on February 28, 2020, caused the VIX to close above 40 (for the first time in four years). Subsequently, the VIX soared to an unprecedented 82 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 experienced severe fluctuations that week but had a slight technical rebound), while BTC rebounded by about 7%. In terms of winning rates, both had a 100% success rate, but this was solely due to a single event's rise (which does not guarantee similar outcomes in the future). Overall, when the VIX reaches historical extremes above 40, it often indicates that the market's extreme panic selling pressure is nearing its peak, creating relatively high opportunities for a short-term rebound, which, in the larger cycle, are considered relative lows.

February 5, 2018 (VIX surged over 100% during intraday trading to nearly 50): The S&P 500 only rose 0.28% a week later, with no significant increase. However, Bitcoin plummeted 16% that day, reaching a local low of ~$6,900, and two weeks later rebounded to over $11,000, indicating substantial rebound momentum. Yet, in the context of that time, the correlation between Bitcoin and real-world asset trends was not high, thus using VIX to judge Bitcoin's trend was not appropriate.

Mid-March 2020 (VIX peak of 82): After the S&P 500 bottomed out on March 23, it rebounded over 10% within a week, while Bitcoin also quickly surged about 30% from below $4,000.

Although the short-term performance after extreme panic is statistically slightly positive, the small sample size means high uncertainty, and at that time, Bitcoin's correlation with the US stock market was not as highly aligned as it is now. In practice, a VIX above 40 is more of a signal confirming that the market is in an extreme panic state, and future market trends still need to be assessed in conjunction with fundamental information.

Low Volatility Range: VIX ≤ 15

When the VIX index falls below 15, it typically indicates that the market is in a relatively calm state. Investor sentiment is more optimistic, and demand for hedging is low. However, the subsequent trend at this time is not as consistently clear 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 at the beginning of 2019, during the stable period at the end of 2019, during the upward phase of the stock market in mid-2021, and in mid-2023, among others. During these periods, market volatility was at historically low levels (sometimes referred to as market calm).

Within 7 days after a VIX event point at a very low level, the average return of the S&P 500 is approximately +0.8%, with a win rate of around 60-75% (slightly higher than random probability). Overall, stock indices tend to maintain a gradual rise or slight fluctuations in a low volatility environment. For example, in the week following October 2019 when VIX fell below 15, the S&P 500 remained stable and slightly reached new highs; in July 2023, when VIX was around 13, the index continued to rise gradually by about 2% in the following week. This indicates that a low VIX does not necessarily lead to an immediate pullback, and the market may continue to maintain an upward trend for a period of time. However, it is important to be cautious, as extremely low volatility often implies market complacency, and once a sudden adverse event occurs, volatility and declines may significantly amplify.

Bitcoin's performance during low VIX periods lacks a clear direction. Statistics show that its 7-day average increase is only about +2%, with a win rate of approximately 60%. Sometimes, the calm period of low VIX coincides with BTC's own bull market phase (for example, in the spring of 2019, low VIX was accompanied by a significant rise in BTC); however, there are also times when BTC experiences a corrective trend during low VIX periods (for instance, in early 2018, when VIX remained low, Bitcoin was in a downtrend following the bubble burst).

Therefore, the low VIX does not provide significant predictive value for the subsequent trend of BTC and must be considered in conjunction with the funding sentiment and cycle considerations of the crypto market itself.

Overall, when the VIX is below 15, the S&P 500 tends to continue its existing trend (mostly a gradual rise), but the magnitude of the increase and the win rate are significantly lower than the rebound after a panic. Meanwhile, BTC lacks a unified response pattern in this environment, indicating that low volatility in traditional markets does not necessarily mean synchronization in the crypto market.

Conclusion: Risks and opportunities coexist, and carving a boat to seek a sword is merely a reference.

When the VIX soars to the 30-40 range:

• Short-term trading may have risks, but it also contains potential reversal opportunities.
• BTC usually drops in sync during panic selling, but as the panic subsides, the excessive shorts accumulated during the sell-off can easily trigger a strong technical rebound.
• If the VIX starts to peak and falls back (slowly returning from 35 to below 30), it is a potential short-term buying opportunity for BTC.
• It is essential to assess the severity of the event itself; if a major financial risk erupts, the market may continue to decline further.

When VIX ≥ 40:

• Represents a market that has fallen into extreme panic, including possibilities such as liquidity exhaustion and massive capital withdrawal.
• The probability of a short-term drop in BTC is extremely high, but often if the panic eases somewhat after a week or two, the expected rebound of BTC will also be relatively astonishing.
• In this environment, it is advisable for short-term speculators to maintain a high level of risk control and strictly adhere to stop-loss measures, because while "licking blood from the knife's edge," profits and risks coexist.
• From a long-term perspective, they are all relatively low points.

When VIX ≤ 15:

• The market is generally in a natural state. Whether BTC rises often depends more on the cryptocurrency market's own cycles, funding conditions, or technical trends.
• In an overly calm environment, be aware that once unexpected variables or black swan events occur, VIX may rise rapidly, and BTC could also follow with a decline.
• It may be advisable to keep a portion of cash/stablecoins during this period as a precaution, and to stay alert to the changing winds of risk.

The middle area of VIX 15-30:

• Generally regarded as the "normal fluctuation" range. BTC is also influenced by the crypto cycle and macro liquidity conditions, during which VIX can serve as a supplementary indicator.
• If the VIX rises from above 20 to near 30, it indicates that panic is gradually increasing, and there is a need to moderately guard against risks; conversely, if the VIX slowly falls from 25 to below 20, it shows that panic is easing, and BTC may be relatively stable.

Currently, the VIX is at 50. In the face of uncertainty regarding U.S. tariff policies, market sentiment remains in a state of extreme panic. However, opportunities always arise from despair.

During the 2020 pandemic, the VIX peaked above 80, while the S&P 500 was around 2300 points. Even after the recent panic sell-off, the S&P 500 is still near 5000 points, with over 100% ROI in five years; at the same time, Bitcoin was at an excellent buying point, only at 4800 USD, while this bull market peaked at 110,000 USD, with a maximum increase of nearly 25 times.

Every significant drop is often accompanied by market repricing and capital flow; chaos is a ladder, and whether one can use it to climb higher is the key topic of this period.