It’s a risk-on environment, with stocks leading major cryptocurrencies higher, but Wall Street’s fear gauge, the VIX, is stirring up some nerves.

On Monday, Wall Street’s benchmark index, the S&P 500, set a record high for the fourth consecutive trading day, reaching 6,519 points. The tech-heavy Nasdaq index also hit lifetime highs, and the Dow Jones traded near the peak recorded on Thursday.

Equities rose, disregarding the bearish September manufacturing survey, as bond yields fell in anticipation of a 25-basis-point Fed rate cut on Wednesday. According to the Fed funds futures, traders expect rates to drop to 3% from the present 4.25% within the next 12 months.

Still, bitcoin (BTC) lacked clear direction, as it traded back and forth between $114,000 and $117,000, forming an indecisive Doji candle. As of writing, it changed hands at $115,860, continuing a lacklustre trading pattern below record highs of above $124,000 hit in August.

The dour price action is likely due to long-term holders continuing to take profits and countering the bullish pressure from spot ETF inflows.

Other major tokens such as ether (ETH), XRP (XRP) and dogecoin (DOGE) have lost upward momentum too.

Ethereum’s ether token has pulled back from nearly $4,800 to $4,500 in three days, having put in lifetime highs above $5,000 last month. The weakness is perplexing, as ether, popularly known as the internet bond due to its staking yield mechanism, stands to become an attractive investment with the impending Fed rate cuts.

The payments-focused XRP has pulled back to $3.00, marking a weak follow-through to the bullish breakout from the descending triangle confirmed last week. Meanwhile, dogecoin, the leading meme token by market value, has dropped sharply to 26.7 cents from 30.7 cents amid reports of whale selling.

Analysts said that a 25-basis-point rate cut could resume the slow grind higher in BTC. Meanwhile, a surprise 50 bps move could see stocks, crypto and gold go berserk.

Keep an eye on VIX and BTC vol indices

Monday’s rise in U.S. stocks was characterized by an uptick in the VIX index, which represents the options-based implied or expected volatility in the S&P 500 over the next 30 days.

The VIX rose over 6% to 15.68 points. While it still largely hovers at multi-month lows, the Tuesday spike warrants attention for two reasons: First, historically, the two have moved in opposite directions, as evident from the correlation of nearly -90 over a 90-day period.

Secondly, a breakdown in the negative correlation often precedes corrections, as noted by the quant-driven market intelligence platform Menthor Q on X.

«SPX rose with the VIX today. This often signals stretched upside positioning, traders grabbing calls or hedging downside [with puts], leaving markets vulnerable,» Menthor Q said.

The VIX is influenced by demand for options, and Tuesday’s rise in the index could have been led by traders seeking S&P 500 puts or downside protection.

Perhaps, market participants anticipate a correction following the expected 25-basis-point Fed rate cut on Wednesday.

BTC implied volatility rises

Volmex’s bitcoin implied volatility index, which represents the expected price turbulence over 30 days, also rose by 3% Monday, maintaining its positive correlation with VIX.

Note that BTC’s historic positive correlation with implied volatility indices has flipped negative since the spot ETFs went live in January last year and more so since President Trump’s electoral win in November last year.