Why Are Markets Freaking Out?

Making sense of the spiking VIX and the market crash

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Over the weekend, the price of bitcoin fell by about 18% in terms of the U.S. dollar. The Japanese stock market declined by 12% on Monday and the Japanese yen has completed a wild roundtrip in its exchange rate with the dollar (see below). In the U.S., the S&P 500 opened nearly 5% lower than its Friday close. On top of that, market volatility (as measured by the VIX) reached its highest point since the pandemic this morning. What in the world is going on?

As with any dramatic swing in markets, there is not only one cause. It is a confluence of a variety of factors all pushing the market in one direction at once. In this post, I will attempt to walk people through what I think is going on.