Thomas Lee, managing companion and head of analysis at Fundstrat Global Advisors, outlined in a current CNBC interview why the VIX – a real-time volatility index from the Chicago Board Options Exchange (CBOE) – will grow to be an vital 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, that 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 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 12 months. Why? According to the chief analyst, inflation stunned the Fed on the draw back final 12 months. This 12 months, it is going to be the opposite manner round. Inflation will fall sooner than the Fed lately forecasted.
This can have a decisive impression 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 Fifties, following a detrimental 12 months, if the VIX is decrease on common than the prior 12 months, we’re up a mean of twenty-two%. So I feel we’re arrange for a 20% 12 months.”
According to the Fundstrat analyst, Thursday might 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 which means 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 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 a better beta) over the previous 12 months, except 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 on account of optimistic CPI knowledge or a pivot by the U.S. Federal Reserve – BTC may see a rally in direction of $20,000.
As lately as November, Lee stated he was sticking to his bitcoin worth forecast of $200,000, even when the present market is detrimental. According to him, the BTC worth will rise in tandem with the S&P 500 if there are not 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 | Source: BTCUSD on TradingView.com
Featured picture from Art Rachen / Unsplash, Chart from TradingView.com