Can Bitcoin Become Market’s New Fear Gauge?
Brian Stutland of Equity Armor Investments said that the answers to the question of how the market will move further can lie in bitcoin.
On Tuesday in the interview to Fast Money Stutland stated, “Bitcoin is sort of becoming the new VIX, in sort of getting ahead of credit risk in the banking industry.”
The CBOE volatility index, or VIX, is a long-standing indicator of volatility, unpredictability and fear in the market, illustrated by S&P 500 stock option prices. The index is sometimes called the” fear gauge” of the market. But Stutland told CNBC that bitcoin is just as good for the indicator.
Stutland mentioned, “There is huge correlation right now between VIX and bitcoin 30 days ago, 30 trading days ago, that 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.”
Stutland announced that it makes sense, given that digital money is still an unregulated way for investors and speculators to transfer and exchange capital.
“As credit risk increases we get more volatility in the market,” he said.
VIX rose to highs 18.39 Tuesday, from Friday’s lows 12.59. The market also had a turbulent day on Tuesday. All three major indexes closed lower, and the Dow Jones Industrial Average fell by almost 500 points at its lows.