Thomas Lee, managing associate and head of analysis at Fundstrat Global Advisors, outlined in a latest CNBC interview why the VIX – a real-time volatility index from the Chicago Board Options Exchange (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 exhibits the implied volatility for the following 30 days. The rule of thumb is: if the VIX will increase, the S&P 500 is more likely to lower, and if the VIX worth decreases, the S&P 500 is more likely 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? According to the chief analyst, inflation surprised the Fed on the draw back final yr. This yr, it is going to be the opposite manner round. Inflation will fall sooner than the Fed not too long ago forecasted.
This may have a decisive influence on the VIX, which is able to decline in worth. “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.”
According to the Fundstrat analyst, Thursday can be very telling. If the core CPI is once more under consensus, which means the unique Fed forecast of 4.8% for PCE is 60 foundation factors too excessive.
“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 shares might rally greater than 20% this yr, regardless of the newest #Fedspeak pic.twitter.com/fToibbPp2W
— CNBCOvertime (@CNBCOvertime) January 9, 2023
What Does This Matter For Bitcoin?
For bitcoin, the prediction of Thomas Lee is attention-grabbing 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 value 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) can be used as a sentiment barometer for bitcoin. If Lee’s predicted drop within the VIX to 17 really happens – both because of optimistic CPI knowledge or a pivot by the U.S. Federal Reserve – BTC might see a rally in the direction of $20,000.
As not too long ago as November, Lee mentioned he was sticking to his bitcoin value forecast of $200,000, even when the present market is adverse. According to him, the BTC value will rise in tandem with the S&P 500 if there aren’t any extra scams and bankruptcies of key gamers within the crypto trade.
At press time, the bitcoin value was exhibiting a slight uptrend over the previous week, buying and selling at $17,296.
Featured picture from Art Rachen / Unsplash, Chart from TradingView.com
