Why The VIX Could Predict A Bitcoin And Crypto Rally

Thomas Lee, managing companion and head of analysis at Fundstrat International Advisors, outlined in a current CNBC interview why the VIX – a real-time volatility index from the Chicago Board Choices Alternate (CBOE) – will turn out to be an essential 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, which means that it solely reveals the implied volatility for the following 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 steady 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 response to the chief analyst, inflation surprised the Ate up the draw back final yr. This yr, will probably be the opposite method round. Inflation will fall quicker than the Fed not too long ago forecasted.

This can have a decisive impression 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 might be at 17,” Lee claims and continues to say that “for the reason that Nineteen Fifties, following a unfavorable yr, if the VIX is decrease on common than the prior yr, we’re up a median of twenty-two%. So I feel we’re arrange for a 20% yr.”

In response to the Fundstrat analyst, Thursday can 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 may be the final hike and after that it cuts,” Lee asserts.

Why @fundstrat says shares may 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 fascinating in that the value had a excessive correlation with the S&P 500 (with the next beta) over the previous yr, except 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 risky in each instructions in response to modifications available in the market.

To that extent, the VIX (presently standing at 22) will also be used as a sentiment barometer for bitcoin. If Lee’s predicted drop within the VIX to 17 truly happens – both because of optimistic CPI information or a pivot by the U.S. Federal Reserve – BTC may 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 unfavorable. In response to 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 business.

At press time, the bitcoin worth was exhibiting a slight uptrend over the previous week, buying and selling at $17,296.

Featured picture from Artwork Rachen / Unsplash, Chart from TradingView.com