Since it was created, Bitcoin has been termed an asset that can stand on its’ own and is therefore, not pegged to the movements of the traditional stock market. According to an article today via CoinDesk, this status has not been proven yet, due to a few key indicators.
Central to these indicators is something which you may not be familiar with, called the VIX Index. Reportedly, this refers to the CBOE’s Volatility Index, which is meant to look 30 days into the future to predict the coming volatility in the S&P 500. In doing this, it focuses mainly on predicting how much fear will influence the traditional stock market over this time, which is apparently why it is also called the “fear gauge.”
In their article today, Coindesk claims that the VIX Index is supposed to be down when the S&P 500 goes up and up when the S&P 500 drops. With this in mind, they also circle back to it being termed the “fear gauge” to point out that the VIX serves as a very useful tool for seasoned investors to avoid panic selling.
With Bitcoin, however, this does not all play out as it is supposed to play out. Coindesk reported that while the VIX showed an inverse correlation with the traditional stock market at the beginning of and at the close of 2018, the opposite was true with regards to it and Bitcoin.
If you are wondering why all of this matters to the average investor, the answer is simple. Until a new indicator is developed that works with cryptocurrencies and traditional assets simultaneously, it will be difficult to convince risk-averse investors that Bitcoin is a safe investment.
By: BGN Editorial Staff