Low Volatility On Wall Street Turned Investors Into Bitcoin For Generous Returns

Low volatility on Wall Street forced investors to seek more traditional asset classes in pursuit of better returns. Maybe more excitement.

Analysts at Deutsche Bank say the correlation between bitcoin prices and the Wall Street "Fear Index" skyrocketed. An article published Friday by Masao Muraki, a global financial strategist at Deutsche Bank, notes that "the correlation between Bitcoin and VIX has risen dramatically."

The Chicago Board Options Volatility Index (VIX) is commonly known on Wall Street as the Fear Index. This is the most extensive barometer of the recent volatility in the stock market. VIX measures market volatility in the future. Currently at near record lows, which means investors expect the stock market will not have too many things to happen.

The NYSE has enjoyed a nine-year bull market, the second-longest bull in the recent financial history. The U.S. economy is steadily growing, with an average annual GDP growth rate of about 3.2% in the third quarter of 2017. The average 20x P / E of the U.S. stock market is almost overvalued, and the steadily growing economy provides solid support for the valuation fundamentals.

At the same time, the Federal Reserve's low-interest rate policy, launched after the 2008 recession following the global financial crisis, has been extended. As the interest rate cut to zero during the financial crisis, the Federal Reserve's decision-making committee increased only five rates. The most recent rate hike came in December by raising the benchmark short-term federal funds rate by 25 percentage points to 1.25% to 1.5%.

Long-term low interest rates have forced investors into the stock market to seek a decent return on their money. Due to this TINA effect, the market has steadily risen (TINA is an abbreviation for no substitute). Now low VIX forces them to further view the border asset class. Deutsche Bank believes that the cryptocurrency market is the beneficiary of these initiatives.

From December 2017 to writing, VIX was at a record low, suggesting a very low market volatility. Enormous fluctuations in the cryptocurrency market over the same period, the password space normal day, appeared in double-digit changes within 24 hours.

For example, on 22 December, bitcoin prices plunged 22%. But it has risen 91% a month ago. According to coinmarketcap, the less well-known cryptocurrency Tron doubled from 36 to 19 January from January 17 to January 19.

The dramatic and dramatic fluctuations familiar to these cryptocurrency lovers are drawing the attention of Wall Street people who seem fearless.