As NewsBTC reported, the VIX skilled a development reversal final Friday which might be important for Bitcoin as nicely.
The VIX volatility index exhibits merchants the anticipated vary of fluctuation of the S&P 500. Remarkably, there may be 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 yr.
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 major 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. While the S&P noticed one other 1.4% plunge, the BTC worth remained comparatively secure at $17,000.
However, 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 worth stood at $16,828.
Investors 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 Provide A Foreshadowing For Bitcoin?
So, given Bitcoin’s excessive correlation with the S&P 500, one other drawdown might be imminent. However, the VIX shouldn’t be used as the one indicator. The VIX depends on expectations based mostly on previous occasions.
In addition, the VIX can not account for sudden, sudden occasions that will trigger robust market reactions. Historically, it has at all times been the case that the VIX couldn’t predict a backside.
Key occasions are determinants of when a backside is reached. However, for the reason that VIX is calculated based mostly on expectations, it can’t be a key to detecting a change in development attributable to sudden occasions out there.
And the all overshadowing occasion would be the subsequent FOMC assembly of the US central financial institution on December 14, when the FED will resolve on its additional rate of interest coverage. Remarkably, the assembly will embrace a “summary of economic projections”.
But even earlier than that, there are two extraordinarily vital knowledge that make predictions about how the FED will act.
While the brand new inflation knowledge within the type of the buyer worth index (CPI) shall be printed on December 13, the producer worth index (PPI) will already be printed on Friday, December 9.
This will already present an perception into how the CPI knowledge may prove. This is as a result of the PPI serves as a number one indicator for the buyer worth index.
When producers face enter inflation, will increase of their manufacturing prices are handed on to retailers and shoppers. Thus, the PPI might be trend-setting.
If the PPI and CPI proceed to fall, at finest greater than anticipated, the possibilities of a Santa rally for Bitcoin are fairly excessive.