Why The VIX Could Predict A Bitcoin And Crypto Rally
Thomas Lee, managing associate and head of analysis at Fundstrat World Advisors, outlined in a latest CNBC interview why the VIX – a real-time volatility index from the Chicago Board Choices Trade (CBOE) – will change into an necessary indicator for fairness markets and probably Bitcoin within the coming months.
VIX was created to quantify market expectations of volatility for the S&P 500. In doing so, the VIX is future oriented, that means that it solely reveals the implied volatility for the subsequent 30 days. The rule of thumb is: if the VIX will increase, the S&P 500 is prone to lower, and if the VIX worth decreases, the S&P 500 is prone to stay secure or improve.
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 Consumed the draw back final yr. This yr, it is going to be the opposite manner round. Inflation will fall sooner than the Fed not too long ago forecasted.
It will have a decisive affect on the VIX, which is able to decline in worth. “The bond market volatility is beneath its 200 day [average]. If that occurs to the VIX, we’d be at 17,” Lee claims and continues to say that “for the reason that Fifties, following a adverse yr, if the VIX is decrease on common than the prior yr, we’re up a mean of twenty-two%. So I feel we’re arrange for a 20% yr.”
In line with the Fundstrat analyst, Thursday shall be very telling. If the core CPI is once more beneath consensus, meaning the unique Fed forecast of 4.8% for PCE is 60 foundation factors too excessive.
“And meaning inflation is undershooting by an enormous margin. The bond market is gonna push the Fed to say that February is likely to be the final hike and after that it cuts,” Lee asserts.
Why @fundstrat says shares might rally greater than 20% this yr, regardless of the most recent #Fedspeak pic.twitter.com/fToibbPp2W
— CNBCOvertime (@CNBCOvertime) January 9, 2023
What Does This Matter For Bitcoin?
For bitcoin, the prediction of Thomas Lee is attention-grabbing in that the worth had a excessive correlation with the S&P 500 (with a better beta) over the previous yr, until there have been crypto-intrinsic shocks just like the collapse of FTX or Terra Luna. This meant that the bitcoin worth behaved very equally to the S&P 500, however was extra unstable in each instructions in response to modifications available in the market.
To that extent, the VIX (at present standing at 22) may also be used as a sentiment barometer for bitcoin. If Lee’s predicted drop within the VIX to 17 really happens – both on account of optimistic CPI information or a pivot by the U.S. Federal Reserve – BTC might see a rally in direction of $20,000.
As not too long ago as November, Lee stated he was sticking to his bitcoin worth forecast of $200,000, even when the present market is adverse. In line with him, the BTC worth will rise in tandem with the S&P 500 if there aren’t any extra scams and bankruptcies of key gamers within the crypto trade.
At press time, the bitcoin worth was displaying a slight uptrend over the previous week, buying and selling at $17,296.
Featured picture from Artwork Rachen / Unsplash, Chart from TradingView.com
