Wall Street’s weak volatility forces investors to look for less traditional asset classes, such as Bitcoin, looking for better profits. And maybe a little more excitement.
There is a spectacular rise in the correlation between the price of Bitcoin and the Wall Street Fear Index, according to analysts at Deutsche Bank. A Friday note from Deutsche Bank’s global financial strategist, Masao Muraki, explained that the correlation between Bitcoin and VIX had grown dramatically.
Volatility Index for Exchange Board Options (VIX) is called collocation on Wall Street as the Fear Index. That is the most popular barometer of short-term volatility in the stock market. VIX measures an estimate of the future volatility market. Currently, it is at low levels, which means investors do not expect anything on the stock market.
NYSE has liked a nine-year bull market, the second longest in recent financial history. The US economy is steadily rising, with annual GDP growth of around 3.2% in the third quarter of 2017. While the P / E average of US stocks is approaching over-valuation, a steadily increasing economy solid support to substantiate the evaluation.
At the same time, the Fed’s low-interest-rate policy following the recession that followed the 2008 global financial mess was prolonged. Since interest rates have fallen to zero during the Financial slump, the Fed’s policy-making committee has increased rates only five times. The most recent increase was in December, raising the short-term reference rate of federal funds by a quarter percentage point to a rate of 1.25-1.5%.
Low-interest rates have forced investors on the stock market to look for proper returns on their money. The demand has steadily increased due to this TINA effect, “TINA is the acronym for There is no option.” Now, the low VIX level forces them to look even more at the classes of border assets. The cryptocurrency market is the recipient of these movements, argues Deutsche Bank.
Amid December 2017 and the date of writing, VIX stood at historically low levels, suggesting extremely low market volatility. The cryptocurrency market in the similar period experienced wild fluctuations, with two-digit earnings and losses over a 24-hour period, just a typical day in the crypto-space.
On December 22, the Bitcoin rate dropped by 22%. However, it was 91% higher than a month ago. According to the Coinmarketcap, the Tron, a less known cryptocurrency, doubled in price over 36 hours from January 17-19.
These fast and dramatic couplings, familiar to the cryptocurrency lovers, capture the attention of a Wall Street crowd, seemingly bored with too little fear.