Bitcoin in relation to the volatility index. Future Predictions

2020年12月29日

Most traders, and also bystanders have probably noticed the absolutely mammoth rally trajectory bitcoin has been on lately.
Many ask is it time to ride the wave?
Others ask when is it going to fall

I was looking doing a bit of charting on the long term chart of bitcoin and noticed something peculiar when comparing bitcoin to the volatility index
Namely, the dips in the value of bitcoin lined up eerily well with massive spikes in the VIX.

Why is this?
My theory goes like this, bitcoin is one of if not the most popular cryptocurrencies, and naturally a huge amount of it is traded by people throughout the year,
this would likely mean that a drastic or sudden change in trading behavior across the whole market is likely to be reflected in the value in bitcoin, somewhat
like the S&P500 index.
This is somewhat compounded with the fact that the US dollar has taken a sudden and long fall in value, making it a somewhat less stable currency to hold and less desirable
as a result.

If a bunch of traders were to say, clear their portfolios for the holidays or end of year personal performance reviews, it would could lead to a market crash, taking bitcoin with it.

But it's more than just that, even small market wide fluctuations represented in the VIX manifest in small bearish behavior bitcoin.

So what does this all tell us?
The market has been on a long and consistent trend upwards for the bigger cap stocks, and this has to end at some point.
Combine this with a recent spike in the VIX that once again corresponded with a visible sell off in securities like
bitcoin that has since come back down to a more normal figure, I propose that we can predict the next huge bitcoin crash some time in
early 2021.
This bitcoin crash count happen soon, judging by the VIX, it has bottomed out somewhat and is preparing for a reversal,
there is likely still a little upward movement left but it could be the last chance to get a little on a long position.

See you on the next up, bitcoin.



DISCLAIMER:
This idea is was created as a part of a charting exercise by a trader limited experience of the market.
This are purely observations and should be taken but a grain (heap) of salt.
This trader (me) is not dead set on using this strategy for a real trade.