As NewsBTC reported, the VIX skilled a development reversal final Friday which could possibly be important for Bitcoin as effectively.
The VIX volatility index reveals merchants the anticipated vary of fluctuation of the S&P 500. Remarkably, there’s an inverse correlation between the VIX index and the S&P 500. A rising VIX index often means falling costs for the S&P 500, and vice versa.
Rising VIX Threatens Bitcoin Bulls
The VIX dropped under the extent of 19 on Friday, a mark that has been extremely important during the last 12 months.
In August, the final time the VIX was this low, it subsequently rose above 34, dragging the S&P 500 down 15%. Bitcoin additionally skilled a big downtrend, pushed by its correlation with the S&P 500.
On Monday, BTC bounced off horizontal resistance at $17,400 and fell under $17,000 as VIX initiated its development reversal with a stellar market open.
Yesterday, nonetheless, Bitcoin bulls initially appeared to have the higher hand. Whereas the S&P noticed one other 1.4% plunge, the BTC value remained comparatively secure at $17,000.
Nevertheless, in the previous couple of hours, BTC registered a retracement of round 2% and $350. At one level, BTC fell to $16,691 after the VIX continued its uptrend and rose to a stage of twenty-two.46. At press time, the Bitcoin value stood at $16,828.
Traders ought to take note of the VIX. If the VIX sees one other rise right this moment, the BTC bulls might lose steam. Then, the help zones at $16,600 and $16,300 are going to be key.
Will Friday Present A Foreshadowing For Bitcoin?
So, given Bitcoin’s excessive correlation with the S&P 500, one other drawdown could possibly be imminent. Nevertheless, the VIX shouldn’t be used as the one indicator. The VIX depends on expectations based mostly on previous occasions.
As well as, the VIX can’t account for sudden, sudden occasions that will trigger sturdy market reactions. Traditionally, it has all the time been the case that the VIX couldn’t predict a backside.
Key occasions are determinants of when a backside is reached. Nevertheless, because the VIX is calculated based mostly on expectations, it can’t be a key to detecting a change in development on account of sudden occasions available in the market.
And the all overshadowing occasion would be the subsequent FOMC assembly of the US central financial institution on December 14, when the FED will determine on its additional rate of interest coverage. Remarkably, the assembly will embody a “abstract of financial projections”.
However even earlier than that, there are two extraordinarily necessary information that make predictions about how the FED will act.
Whereas the brand new inflation information within the type of the buyer value index (CPI) will likely be revealed on December 13, the producer value index (PPI) will already be revealed on Friday, December 9.
This may already present an perception into how the CPI information would possibly end up. It’s because the PPI serves as a number one indicator for the buyer value index.
When producers face enter inflation, will increase of their manufacturing prices are handed on to retailers and shoppers. Thus, the PPI could possibly be trend-setting.
If the PPI and CPI proceed to fall, at greatest greater than anticipated, the possibilities of a Santa rally for Bitcoin are fairly excessive.