Market volatility intensifies? Use these volatility ETFs to safeguard your investment portfolio

The market’s start this year has been unstable, with geopolitical risks remaining high. U.S. military actions in Venezuela have added complexity to the already fragile global geopolitical landscape.

Since last Friday, the CBOE Volatility Index has risen approximately 4.5%, indicating a shift in market sentiment toward risk aversion. The current market environment is fragile, and investors must navigate a landscape where risk and resilience coexist.

01 The New Normal of the Market: Volatility Becomes a Key Investment Theme

By 2026, the global markets stand at a new crossroads. While JPMorgan Chase’s global research division remains optimistic about the stock markets worldwide, forecasting double-digit growth in both developed and emerging markets, it also issues a critical warning: the probability of a recession in the U.S. and global economy in 2026 is as high as 35%.

This contradictory market outlook is precisely the breeding ground for increased volatility. Investment institutions point out that the current environment is fragile, with risk and resilience coexisting. Investors need to develop strategies accordingly.

Market volatility is driven by multiple factors. On one hand, the Federal Reserve is in a rate-cutting cycle, and the trend of U.S. dollar depreciation is becoming clearer. A weaker dollar typically pushes up the prices of commodities priced in dollars, increasing raw material costs for companies.

This transmission mechanism directly impacts product pricing and exacerbates price fluctuations.

On the other hand, geopolitical risks persist and may be underestimated by the market in 2026. U.S. military actions in Venezuela and ongoing tensions in key hotspots in the Middle East and Asia all increase market uncertainty.

02 Professional Tools: The Hedging Logic of Volatility ETFs

In the face of increasing market volatility, volatility ETFs have become an effective hedging tool for investors. These funds aim to track market volatility indices and often perform well during turbulent times.

The core value of volatility ETFs lies in their ability to provide returns positively correlated with market volatility. When market panic rises, volatility indices usually increase, and the value of these ETFs also rises accordingly.

This characteristic makes them ideal tools for hedging downside risk in a portfolio.

The core philosophy of investing in volatility ETFs is “prevention is better than cure”—taking proactive measures is always better than facing avoidable risks after the fact. These funds performed well during the market chaos of 2025, and if volatility persists, they may further increase in value.

For long-term investors, short-term uncertainties might be ignored, but in the current economic environment, volatility funds and strategies are ideal for short-term investors to reassess their volatility exposure.

03 Core Products: In-Depth Analysis of Four Types of Volatility ETFs

Among many volatility ETFs, several products have attracted attention due to their specific strategies and performance, each with its own design and applicable scenarios.

iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) aims to track the total return of the S&P 500 VIX Short-Term Futures Index. This index provides exposure to a daily rolling long position in VIX futures contracts for the first and second months. The annual fee rate is 0.89%, suitable for investors seeking direct exposure to short-term volatility expectations.

ProShares VIX Short-Term Futures ETF (VIXY) tracks the performance of the S&P 500 VIX Short-Term Futures Index, which measures the movement of a VIX futures portfolio, aiming to track expected changes over the next month. This fund is suitable for investors expecting increased volatility in the S&P 500, with an annual fee rate of 0.85%.

For those seeking medium-term volatility exposure, ProShares VIX Mid-Term Futures ETF (VIXM) offers an alternative. This fund tracks the S&P 500 VIX Mid-Term Futures Index, aiming to track expected changes over the next five months. It also charges an annual fee of 0.85%.

In addition to these volatility-focused tools, traditional safe-haven assets also play a role in volatile markets. Since the beginning of 2026, gold and silver prices have oscillated upward, with gold ETFs’ net asset values continuing to rise, and capital flows into these assets increasing rapidly.

04 Crypto Perspective: Dual Volatility in the Digital Asset Market

The cryptocurrency market exhibits unique characteristics of volatility. Early 2026 saw new momentum, with Bitcoin rising over 7% and Ethereum approximately 9%.

This rally occurred in an environment of exceptionally thin liquidity. Spot trading volumes approached multi-year lows, increasing price sensitivity. One of the most obvious consequences of thin liquidity is amplified price fluctuations.

The volatility of the crypto market is driven by specific factors. In 2026, spot crypto ETFs listed in the U.S. experienced net inflows exceeding $1 billion in the first two trading days, signaling a return of institutional demand. Geopolitical developments also add a defensive aspect to crypto rebounds.

In such an environment, choosing reliable trading platforms becomes especially important for investors wanting to participate in the crypto market while managing volatility risks.

As of January 6, 2026, data shows that the overall reserve coverage ratio of the Gate platform has reached 125%, significantly above the industry safety benchmark of 100%. The total platform reserves amount to $9.478 billion, supporting nearly 500 different types of user assets.

As of January 12, 2026, the Gate platform’s token GT is priced at $10.31. Regarding core assets, BTC user holdings amount to 17,640 coins, with platform reserves holding 24,817 coins, resulting in an over-collateralization ratio of 40.69%.

05 Investment Strategies: Rational Allocation in Volatile Markets

In a landscape where volatility has become the new normal, investors need to adjust their strategies accordingly. The era of pure speculation cycles is fading, replaced by structural maturity driven by liquidity convergence, infrastructure development, and industry consolidation.

For investors aiming to protect their portfolios in volatile markets, considering volatility ETFs as tactical allocations is advisable. According to Nasdaq analysis, increasing exposure to volatility ETFs in the short term may be a wise choice.

Diversification is key to managing volatility. Besides dedicated volatility ETFs, investors can consider other asset classes that may perform well in turbulent markets. Gold ETFs have gained over 2% since 2026, and China Universal Silver Futures (LOF) has increased by 8.75% year-to-date.

Crypto investors should pay special attention to risks in low-liquidity environments. Vikram Subburaj, CEO of Gate Exchange, warns that although the short-term structure has shifted from weak to strong, low trading volumes increase the risk of sharp price surges or sudden pullbacks.

In such cases, maintaining moderate cash reserves and waiting for more attractive entry points may be a wiser strategy.

Future Outlook

As of January 12, 2026, gold prices remain oscillating around $4,600 per ounce at high levels, while the S&P 500 has gained about 17% over the past year, but volatility remains elevated.

Market experts believe that volatility is unlikely to disappear entirely in 2026. Whether in traditional stock markets or emerging crypto sectors, investors need to find their own balance in this environment.

Volatility ETFs offer a structured way to hedge against market uncertainty, while traditional safe-haven assets like gold continue to demonstrate resilience with returns independent of stocks and bonds, supported by weakening dollar confidence and geopolitical uncertainties.