- The VIX index plunged to its lowest point since 2020.
- Bitcoin’s fear and greed index has moved to the fear area.
- The DXY index is eying its lowest level this year.
The VIX index plunged to the lowest level since February 2020 as investors reacted to the latest interest rate decision by the Federal Reserve. The index retreated to a low of $13.77, signaling that the market volatility is easing. At the same time, the US dollar index (DXY), dropped to $102.50 and is now eying its lowest level this year.
VIX and DXY are retreating
The ongoing VIX index retreat coincided with the ongoing uptrend in American stocks. Data shows that the Dow Jones index jumped by over 350 points while the S&P 500 and Nasdaq 100 indies rose by more than 0.70% and 0.87%, respectively. The DXY index has plunged by over 10% from its highest level this year.
On the other hand, cryptocurrency prices are having a difficult week, with Bitcoin falling for the third straight week. This is the first time this has happened since May last year, showing that investors are getting worried about the industry.
Stocks jumped while the VIX and the DXY indices retreated as investors reacted to the latest interest rate decision by the Federal Reserve. In a statement, the bank decided to leave interest rates unchanged at 5.25%. The accompanying dot plot pointed to two more increases this year, in line with what analysts were expecting.
However, most analysts now believe that the bank is just bluffing. As shown below, DoubleLine’s Jeffrey Gundlach, one of the best-known asset managers, argued that the Fed rate hikes have peaked. Historically, American stocks tend to do well when the Fed is not hiking rates.
Implication for Bitcoin and other cryptocurrencies
As I wrote here, Bitcoin’s fear and greed index moved to the fear zone of 40 while the one focusing on stocks has moved to the extreme greed zone of 75. In most periods, stocks tend to do well when investors are greedy and vice versa. Similarly, Bitcoin tends to underperform when the fear and greed index has moved to the greed area.
The macro factors are supportive of Bitcoin and other altcoins. The challenge is that the crypto industry is facing the most significant regulatory issues on record. As we wrote last week, the Securities and Exchange Commission (SEC) decided to sue Coinbase and Binance.
Therefore, there is a lot of selling pressure in the crypto industry. I believe that most of this selling pressure is coming from institutional investors in the US. Therefore, there is a likelihood that these coins will continue falling in the near term.
To make matters worse, Bitcoin price moved below the important support level at $25,000, meaning that it could soon drop to $20,000.
