Why The VIX May Predict A 20% Bitcoin And Crypto Rally


Thomas Lee, managing accomplice 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 Change (CBOE) – will develop into an essential indicator for fairness markets and presumably 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 exhibits 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 steady or enhance.

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 stunned the Consumed the draw back final yr. This yr, it is going to be the opposite manner round. Inflation will fall quicker than the Fed just lately forecasted.

It will have a decisive affect on the VIX, which can 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 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 could 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 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 out there.

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 really happens – both because of constructive CPI information or a pivot by the U.S. Federal Reserve – BTC may see a rally in direction of $20,000.

As just lately 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.

Bitcoin grinding up, 1-day char | Supply: BTCUSD on TradingView.com

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


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