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

1 year ago

Thomas Lee, managing spouse and caput of probe astatine Fundstrat Global Advisors, outlined successful a caller CNBC interrogation wherefore the VIX – a real-time volatility scale from the Chicago Board Options Exchange (CBOE) – volition go an important indicator for equity markets and perchance Bitcoin successful the coming months.

VIX was created to quantify marketplace expectations of volatility for the S&P 500. In doing so, the VIX is aboriginal oriented, meaning that it lone shows the implied volatility for the adjacent 30 days. The regularisation of thumb is: if the VIX increases, the S&P 500 is apt to decrease, and if the VIX worth decreases, the S&P 500 is apt to stay unchangeable oregon increase.

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

Lee expects a 20% rally for the S&P 500 this year. Why? According to the main analyst, ostentation surprised the Fed connected the downside past year. This year, it volition beryllium the different mode around. Inflation volition autumn faster than the Fed precocious forecasted.

This volition person a decisive interaction connected the VIX, which volition diminution successful value. “The enslaved marketplace volatility is beneath its 200 time [average]. If that happens to the VIX, we would beryllium astatine 17,” Lee claims and continues to accidental that “since the 1950s, pursuing a antagonistic year, if the VIX is little connected mean than the anterior year, we are up an mean of 22%. So I deliberation we are acceptable up for a 20% year.”

According to the Fundstrat analyst, Thursday volition beryllium precise telling. If the halfway CPI is again beneath consensus, that means the archetypal Fed forecast of 4.8% for PCE is 60 ground points excessively high.

“And that means ostentation is undershooting by a immense margin. The enslaved marketplace is gonna propulsion the Fed to accidental that February mightiness beryllium the past hike and aft that it cuts,” Lee asserts.

Why @fundstrat says stocks could rally much than 20% this year, contempt the latest #Fedspeak pic.twitter.com/fToibbPp2W

— CNBCOvertime (@CNBCOvertime) January 9, 2023

What Does This Matter For Bitcoin?

For bitcoin, the prediction of Thomas Lee is absorbing successful that the terms had a precocious correlation with the S&P 500 (with a higher beta) implicit the past year, unless determination were crypto-intrinsic shocks similar the illness of FTX oregon Terra Luna. This meant that the bitcoin terms behaved precise likewise to the S&P 500, but was much volatile successful some directions successful effect to changes successful the market.

To that extent, the VIX (currently lasting astatine 22) tin besides beryllium utilized arsenic a sentiment barometer for bitcoin. If Lee’s predicted driblet successful the VIX to 17 really occurs – either arsenic a effect of affirmative CPI information oregon a pivot by the U.S. Federal Reserve – BTC could spot a rally towards $20,000.

As precocious arsenic November, Lee said helium was sticking to his bitcoin terms forecast of $200,000, adjacent if the existent marketplace is negative. According to him, the BTC terms volition emergence successful tandem with the S&P 500 if determination are nary much scams and bankruptcies of cardinal players successful the crypto industry.

At property time, the bitcoin terms was showing a flimsy uptrend implicit the past week, trading astatine $17,296.