Why The VIX Could Predict A Bitcoin And Crypto Rally


Thomas Lee, managing partner and head of research at Fundstrat Global Advisors, outlined in a recent CNBC interview why the VIX – a real-time volatility index from the Chicago Board Options Exchange (CBOE) – will change into a very important indicator for equity markets and possibly Bitcoin in the approaching months.

VIX was created to quantify market expectations of volatility for the S&P 500. In doing so, the VIX is future oriented, meaning that it only shows the implied volatility for the subsequent 30 days. The rule of thumb is: if the VIX increases, the S&P 500 is prone to decrease, and if the VIX value decreases, the S&P 500 is prone to remain stable or increase.

Fundstrat Analyst Expects A 20% S&P 500 Rally In 2023

Lee expects a 20% rally for the S&P 500 this yr. Why? In line with the chief analyst, inflation surprised the Ate up the downside last yr. This yr, it should be the opposite way around. Inflation will fall faster than the Fed recently forecasted.

This could have a decisive impact on the VIX, which is able to decline in value. “The bond market volatility is below its 200 day [average]. If that happens to the VIX, we could be at 17,” Lee claims and continues to say that “for the reason that Nineteen Fifties, following a negative yr, if the VIX is lower on average than the prior yr, we’re up a mean of twenty-two%. So I believe we’re arrange for a 20% yr.”

In line with the Fundstrat analyst, Thursday might be very telling. If the core CPI is again below consensus, which means the unique Fed forecast of 4.8% for PCE is 60 basis points too high.

“And which means inflation is undershooting by an enormous margin. The bond market is gonna push the Fed to say that February is likely to be the last hike and after that it cuts,” Lee asserts.

Why @fundstrat says stocks could rally greater than 20% this yr, despite the newest #Fedspeak pic.twitter.com/fToibbPp2W

— CNBCOvertime (@CNBCOvertime) January 9, 2023

What Does This Matter For Bitcoin?

For bitcoin, the prediction of Thomas Lee is interesting in that the worth had a high correlation with the S&P 500 (with the next beta) over the past yr, unless there have been crypto-intrinsic shocks just like the collapse of FTX or Terra Luna. This meant that the bitcoin price behaved very similarly to the S&P 500, but was more volatile in each directions in response to changes out there.

To that extent, the VIX (currently standing at 22) may also be used as a sentiment barometer for bitcoin. If Lee’s predicted drop within the VIX to 17 actually occurs – either because of this of positive CPI data or a pivot by the U.S. Federal Reserve – BTC could see a rally towards $20,000.

As recently as November, Lee said he was sticking to his bitcoin price forecast of $200,000, even when the present market is negative. In line with him, the BTC price will rise in tandem with the S&P 500 if there are not any more scams and bankruptcies of key players within the crypto industry.

At press time, the bitcoin price was showing a slight uptrend over the past week, trading at $17,296.


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