Continued Upswing Of VIX Signals Doom For Bitcoin; But Friday Will Be Crucial

Jake Simmons

2 years ago

3 mins read

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As NewsBTC reported, the VIX experienced a trend reversal last Friday which could be significant for Bitcoin as well.

The VIX volatility index shows traders the expected range of fluctuation of the S&P 500. Remarkably, there is an inverse correlation between the VIX index and the S&P 500. A rising VIX index usually means falling prices for the S&P 500, and vice versa.

Rising VIX Threatens Bitcoin Bulls

The VIX dropped below the level of 19 on Friday, a mark that has been highly significant over the last year.

In August, the last time the VIX was this low, it subsequently rose above 34, dragging the S&P 500 down 15%. Bitcoin also experienced a significant downtrend, driven by its correlation with the S&P 500.

On Monday, BTC bounced off horizontal resistance at $17,400 and fell below $17,000 as VIX initiated its trend reversal with a stellar market open.

VIX 2022-12-07 — VIX. Source: TradingView

Yesterday, however, Bitcoin bulls initially appeared to have the upper hand. While the S&P saw another 1.4% plunge, the BTC price remained relatively stable at $17,000.

However, in the last few hours, BTC registered a retracement of around 2% and $350. At one point, BTC fell to $16,691 after the VIX continued its uptrend and rose to a level of 22.46. At press time, the Bitcoin price stood at $16,828.

Investors should pay attention to the VIX. If the VIX sees another rise today, the BTC bulls could lose steam. Then, the support zones at $16,600 and $16,300 are going to be key.

Bitcoin BTC USD 2022-12-07 — BTC price, 4-hour chart. Source: TradingView

Will Friday Provide A Foreshadowing For Bitcoin?

So, given Bitcoin’s high correlation with the S&P 500, another drawdown could be imminent. However, the VIX should not be used as the only indicator. The VIX relies on expectations based on past events.

In addition, the VIX cannot account for sudden, unexpected events that may cause strong market reactions. Historically, it has always been the case that the VIX could not predict a bottom.

Key events are determinants of when a bottom is reached. However, since the VIX is calculated based on expectations, it cannot be a key to detecting a change in trend due to sudden events in the market.

And the all overshadowing event will be the next FOMC meeting of the US central bank on December 14, when the FED will decide on its further interest rate policy. Remarkably, the meeting will include a “summary of economic projections”.

But even before that, there are two extremely important data that make predictions about how the FED will act.

While the new inflation data in the form of the consumer price index (CPI) will be published on December 13, the producer price index (PPI) will already be published on Friday, December 9.

This will already provide an insight into how the CPI data might turn out. This is because the PPI serves as a leading indicator for the consumer price index.

When manufacturers face input inflation, increases in their production costs are passed on to retailers and consumers. Thus, the PPI could be trend-setting.

If the PPI and CPI continue to fall, at best more than expected, the chances of a Santa rally for Bitcoin are pretty high.

Jake Simmons

Jake Simmons, a dedicated crypto journalist, has been passionate about Bitcoin since 2016 when he first learned about it. Through his extensive work with NewsBTC.com and Bitcoinist.com, Jake has become a trusted voice in the crypto community, guiding newcomers and seasoned enthusiasts alike towards a deeper understanding of this dynamic field.

His mission is simple yet profound: to demystify Bitcoin and cryptocurrencies and make them accessible to everyone.
With a professional career in the Bitcoin and crypto scene that began right after graduating with a degree in Information Systems in 2017, Jake has immersed himself in the industry. Jake joined the NewsBTC Group in late 2022. His educational background provides him with the technical prowess and analytical skills necessary to dissect complex topics and present them in an understandable format. Whether you are a casual reader curious about Bitcoin or an investor seeking to navigate the latest market trends, Jake’s insights offer valuable perspectives that bridge the gap between complex technology and everyday usage.

Jake is not just a reporter on technological trends; he is a firm believer in the transformative potential of Bitcoin over traditional fiat currencies. To him, the current financial system is on the brink of chaos, propelled by unchecked government actions and flawed Keynesian economic policies. Drawing from the principles of the Austrian school of economics, Jake views Bitcoin not merely as a digital asset but as a crucial step towards rectifying a failing monetary system. His libertarian views reinforce his stance that just as the church was separated from the state, so too should money be freed from governmental control.

For Jake, Bitcoin represents more than just an investment; it's a peaceful revolution. He envisions a future where Bitcoin fosters a sustainable and responsible financial framework for generations to come. His advocacy is not about opposition but about evolution, about laying the groundwork for a system that prioritizes transparency and equity over secrecy and inequality.

As a journalist, Jake’s articles are crafted with the precision of a scholar and the passion of a true believer. He provides not only news but also thoughtful analysis that connects the dots between daily developments and larger economic theories. His work is a beacon for those lost in the technical jargon often associated with crypto discussions, illuminating the practical implications and benefits of these technologies.

In summary, Jake Simmons is not just reporting on a revolution; he wants to be part of it, fully committed to enhancing public understanding and adoption of Bitcoin and cryptocurrencies. His work is more than just a collection of articles; it’s a resource, a guide, and a companion for anyone ready to explore the potential of this digital frontier. Whether you are taking your first steps into crypto or are a veteran looking to stay on top of the latest trends, Jake’s insights provide clarity and foresight in an often unpredictable industry. Join him on this journey to reshape the world of finance, one post at a time.

You can engage with his latest takes on Twitter: @realJakeSimmons.

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