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 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.
Why says stocks could rally more than 20% this year, despite the latest — CNBCOvertime (@CNBCOvertime)
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.
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.
Featured image from Art Rachen / Unsplash, Chart from TradingView.com
