Bitcoin moves lockstep with "fear gauge" - WSJ expert
|- Cryptocurrency behaves more gold, the expert believes.
- The recent research shows its tight correlation with VIX.
Bitcoin used to be a separate type of asset, unrelated to the rest of the financial world. However, some experts believe that those days are gone as now the digital currency is more tightly correlated to gold. That's the opinion expressed by the Wall Street Journal expert Paul Vigna.
"Bitcoin’s correlations to other assets aren’t strong, but they are measurable. On a scale of -1 to +1, ranging from completely inverted to perfectly correlated, bitcoin traded at about a 0.84 correlation to gold over the past five days, according to data from research firm Excalibur Pro Inc. That isn’t unexpected for an asset its backers bill as a new version of the yellow metal. Bitcoin also traded at a 0.77 correlation to the Chicago Board of Options Exchange’s VIX index, which measures market volatility," he wrote in his recent piece.
He makes a point that Bitcoin owes its popularity to so-called Quantitative easing (QE) policies, pursued by global central banks after the meltdown of 2008. The unorthodox measures slashed interest rates and flooded global financial markets with cheap liquidity, thus forcing investors to seek risky but more profitable instruments. According to Vigna, "there is no riskier asset than a rebel currency."
Global stock indices like Dow Jones, S&P 500 and Nasdaq have been falling recently. Meanwhile, the correlation ration of Bitcoin and Volatility Index VIX- also known as a "Fear Gauge" - reached 77%, which is a high figure for the cryptocurrency.
VIX (Volatility Index) — is an indicative instrument calculated by CBOE based on the prices of options contracts that reflect the market expectations with regards to future volatility of S&P 500 options.
Interestingly, on the previous week, the head of Morgan Creek Digital Assets Anthony Pompliano denied that bitcoin was correlated to gold or any other traditional asset.
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