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

Jake Simmons
Jake Simmons
2 years ago
3 mins read
Bitcoin BTC

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Thomas Lee, managing partner and head of research at Fundstrat Global Advisors, outlined in a recent CNBC interview why the VIX – a real-time volatility index from the Chicago Board Options Exchange (CBOE) – will become an important indicator for equity markets and possibly Bitcoin in 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, meaning that it only shows the implied volatility for the next 30 days. The rule of thumb is: if the VIX increases, the S&P 500 is likely to decrease, and if the VIX value decreases, the S&P 500 is likely to remain stable or 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 chief analyst, inflation surprised the Fed on the downside last year. This year, it will be the other way around. Inflation will fall faster than the Fed recently forecasted.

This will have a decisive impact on the VIX, which will decline in value. “The bond market volatility is below its 200 day [average]. If that happens to the VIX, we would be at 17,” Lee claims and continues to say that “since the 1950s, following a negative year, if the VIX is lower on average than the prior year, we are up an average of 22%. So I think we are set up for a 20% year.”

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According to the Fundstrat analyst, Thursday will be very telling. If the core CPI is again below consensus, that means the original Fed forecast of 4.8% for PCE is 60 basis points too high.

“And that means inflation is undershooting by a huge margin. The bond market is gonna push the Fed to say that February might be the last hike and after that it cuts,” Lee asserts.

Why @fundstrat says stocks could rally more than 20% this year, despite 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 interesting in that the price had a high correlation with the S&P 500 (with a higher beta) over the past year, unless there were crypto-intrinsic shocks like the collapse of FTX or Terra Luna. This meant that the bitcoin price behaved very similarly to the S&P 500, but was more volatile in both directions in response to changes in the market.

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To that extent, the VIX (currently standing at 22) can also be used as a sentiment barometer for bitcoin. If Lee’s predicted drop in the VIX to 17 actually occurs – either as a result of positive CPI data or a pivot by the U.S. Federal Reserve – BTC could see a rally towards $20,000.

As recently as November, Lee said he was sticking to his bitcoin price forecast of $200,000, even if the current market is negative. According to him, the BTC price will rise in tandem with the S&P 500 if there are no more scams and bankruptcies of key players in the crypto industry.

At press time, the bitcoin price was showing a slight uptrend over the past week, trading at $17,296.

Bitcoin BTC/USD
Bitcoin grinding up, 1-day char | Source: BTCUSD on TradingView.com

Featured image from Art Rachen / Unsplash, Chart from TradingView.com 

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Jake Simmons
Jake Simmons

Jake Simmons

Jake Simmons, a dedicated crypto journalist, has been passionate about Bitcoin since 2016 when he first learned about it. Through his extensive work with NewsBTC.com and Bitcoinist.com, Jake has become a trusted voice in the crypto community, guiding newcomers and seasoned enthusiasts alike towards a deeper understanding of this dynamic field.

Read more

His mission is simple yet profound: to demystify Bitcoin and cryptocurrencies and make them accessible to everyone.
With a professional career in the Bitcoin and crypto scene that began right after graduating with a degree in Information Systems in 2017, Jake has immersed himself in the industry. Jake joined the NewsBTC Group in late 2022. His educational background provides him with the technical prowess and analytical skills necessary to dissect complex topics and present them in an understandable format. Whether you are a casual reader curious about Bitcoin or an investor seeking to navigate the latest market trends, Jake’s insights offer valuable perspectives that bridge the gap between complex technology and everyday usage.

Jake is not just a reporter on technological trends; he is a firm believer in the transformative potential of Bitcoin over traditional fiat currencies. To him, the current financial system is on the brink of chaos, propelled by unchecked government actions and flawed Keynesian economic policies. Drawing from the principles of the Austrian school of economics, Jake views Bitcoin not merely as a digital asset but as a crucial step towards rectifying a failing monetary system. His libertarian views reinforce his stance that just as the church was separated from the state, so too should money be freed from governmental control.

For Jake, Bitcoin represents more than just an investment; it's a peaceful revolution. He envisions a future where Bitcoin fosters a sustainable and responsible financial framework for generations to come. His advocacy is not about opposition but about evolution, about laying the groundwork for a system that prioritizes transparency and equity over secrecy and inequality.

As a journalist, Jake’s articles are crafted with the precision of a scholar and the passion of a true believer. He provides not only news but also thoughtful analysis that connects the dots between daily developments and larger economic theories. His work is a beacon for those lost in the technical jargon often associated with crypto discussions, illuminating the practical implications and benefits of these technologies.

In summary, Jake Simmons is not just reporting on a revolution; he wants to be part of it, fully committed to enhancing public understanding and adoption of Bitcoin and cryptocurrencies. His work is more than just a collection of articles; it’s a resource, a guide, and a companion for anyone ready to explore the potential of this digital frontier. Whether you are taking your first steps into crypto or are a veteran looking to stay on top of the latest trends, Jake’s insights provide clarity and foresight in an often unpredictable industry. Join him on this journey to reshape the world of finance, one post at a time.

You can engage with his latest takes on Twitter: @realJakeSimmons.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

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