Blog

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 develop into an vital 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 reveals the implied volatility for the subsequent 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 secure or enhance.

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

Lee expects a 20% rally for the S&P 500 this 12 months. Why? According to the chief analyst, inflation surprised the Fed on the draw back final 12 months. This 12 months, it is going to be the opposite means round. Inflation will fall quicker than the Fed not too long ago forecasted.

This may have a decisive affect on the VIX, which can 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 beneath 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 may rally greater than 20% this 12 months, 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 worth had a excessive correlation with the S&P 500 (with the next beta) over the previous 12 months, 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 adjustments out there.

To that extent, the VIX (at present standing at 22) can be used as a sentiment barometer for bitcoin. If Lee’s predicted drop within the VIX to 17 truly happens – both because of constructive CPI knowledge or a pivot by the U.S. Federal Reserve – BTC may see a rally in 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 unfavourable. 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 business.

At press time, the bitcoin value was displaying a slight uptrend over the previous week, buying and selling at $17,296.

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