Brian Stutland of Equity Armor Investments stated that Bitcoin [BTC] is like the CBOE Volatility Index or VIX. The VIX has been hailed as the stock markets “fear gauge” since its inception in 1991.
The VIX is a measure of volatility in the stock market which is calculated by aggregating the weighted prices of the S&P Index. They utilize the midpoints of real-time SPX option bids for this purpose. It provides a measure of constant, 30-day expected volatility of the US stock market.
The VIX index is an indirect indicator of credit risk in the market, as it represents volatility. Stutland said that there is a correlation between the VIX and Bitcoin over the last 30 days. He said:
“…[It] is starting to measure out credit risk in the market. That’s what cryptocurrency is becoming. It’s becoming a way to sort of de-risk yourself from credit risk in the banking industry.”
He also stated that cryptocurrency is still unregulated, offering a way for investors to transfer capital. He also said:
“Bitcoin is a way to for investors to basically move their money off the balance sheets of banks and into their own wallets. Essentially storing their money under their pillow in the form of virtual currency.”
Credit risks lead to investors being cautious with their money, due to the inherent risk involved in borrowing from a bank. Stutland said that Bitcoin is “getting ahead of credit risk in the banking industry.”
The price of Bitcoin is still in the lows today after last week’s bearish run brought it down to the low $7000s. It attempted a rally yesterday, going up from $7170 to $7440 in just over 2 hours. It is currently trading at around $7500.
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