Is Bitcoin a Leading Indicator for Stocks?

On Tuesday, Stutland said on “Fast Money” that “Bitcoin is sort of becoming the new VIX, in sort of getting ahead of credit risk in the banking industry,”

Basically, Bitcoin is started to becoming the “money under the pillow” method for many investors due to the fact that they fear for some form of credit risk from the banks so they move there money from the standard assets to their basically own bitcoin wallet.

We can say that VIX is a measure of volatility and fear in the market and if you want to see what potentially the VIX may do in the following months then you may check bitcoin a month ago and see what it did in that time period, Stutland said among others.

“It seems there is a 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,” Stutland said. “That’s what cryptocurrency is becoming a way to sort of de-risk yourself from credit risk in the banking industry.”

Investors probably are going to be cautious with their money if banks increase credit risks, Stutland said.

The 3 major indexes closed lower, with the Dow Jones Industrial Average down nearly 500 points at its lows on Tuesday and the VIX went up to 18.39 while Bitcoin, priced around $7,500 on Wednesday morning, down from nearly $9,000 a month ago or close to $10,000 on May 5. According to CNBC.

Bitcoin (BTC/USD) Technical Analysis

According to Ichimoku system, it is notable that on BTCUSD daily chart the price is below the cloud and the chikou span is below the price, tekan sen and kijun sen seem to be in a bearish formation but the cloud seems to be in a bullish formation and two lines are still inside the cloud.

What we would like to see here is the price to bounce on the cloud and two lines come out from the cloud to start looking for any potential bearish signals.

This article was written by Marios Athinodorou, TeleTrade’s market analyst, and commentator. Among others, Marios is delivering weekly trading webinars. Sign up for upcoming webinars here.