As NewsBTC reported, the VIX skilled a development reversal final Friday which might be important for Bitcoin as effectively.
The VIX volatility index reveals merchants the anticipated vary of fluctuation of the S&P 500. Remarkably, there’s an inverse correlation between the VIX index and the S&P 500. A rising VIX index normally means falling costs for the S&P 500, and vice versa.
Rising VIX Threatens Bitcoin Bulls
The VIX dropped beneath the extent of 19 on Friday, a mark that has been extremely important over the past yr.
In August, the final time the VIX was this low, it subsequently rose above 34, dragging the S&P 500 down 15%. Bitcoin additionally skilled a major downtrend, pushed by its correlation with the S&P 500.
On Monday, BTC bounced off horizontal resistance at $17,400 and fell beneath $17,000 as VIX initiated its development reversal with a stellar market open.
VIX. Supply: TradingView
Yesterday, nevertheless, Bitcoin bulls initially appeared to have the higher hand. Whereas the S&P noticed one other 1.4% plunge, the BTC worth remained comparatively secure at $17,000.
Nonetheless, in the previous few hours, BTC registered a retracement of round 2% and $350. At one level, BTC fell to $16,691 after the VIX continued its uptrend and rose to a degree of twenty-two.46. At press time, the Bitcoin worth stood at $16,828.
Buyers ought to take note of the VIX. If the VIX sees one other rise as we speak, the BTC bulls might lose steam. Then, the help zones at $16,600 and $16,300 are going to be key.
BTC worth, 4-hour chart. Supply: TradingView
Will Friday Present A Foreshadowing For Bitcoin?
So, given Bitcoin’s excessive correlation with the S&P 500, one other drawdown might be imminent. Nonetheless, the VIX shouldn’t be used as the one indicator. The VIX depends on expectations based mostly on previous occasions.
As well as, the VIX can not account for sudden, sudden occasions which will trigger sturdy market reactions. Traditionally, it has at all times been the case that the VIX couldn’t predict a backside.
Key occasions are determinants of when a backside is reached. Nonetheless, for the reason that VIX is calculated based mostly on expectations, it can’t be a key to detecting a change in development resulting from sudden occasions available in the market.
And the all overshadowing occasion would be the subsequent FOMC assembly of the US central financial institution on December 14, when the FED will resolve on its additional rate of interest coverage. Remarkably, the assembly will embody a “abstract of financial projections”.
However even earlier than that, there are two extraordinarily essential information that make predictions about how the FED will act.
Whereas the brand new inflation information within the type of the patron worth index (CPI) will probably be printed on December 13, the producer worth index (PPI) will already be printed on Friday, December 9.
This may already present an perception into how the CPI information may prove. It is because the PPI serves as a number one indicator for the patron worth index.
When producers face enter inflation, will increase of their manufacturing prices are handed on to retailers and shoppers. Thus, the PPI might be trend-setting.
If the PPI and CPI proceed to fall, at finest greater than anticipated, the possibilities of a Santa rally for Bitcoin are fairly excessive.