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Bitcoin is the market's new fear gauge, investor says

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The answers to which way the market will move next may lie in bitcoin, said Brian Stutland of Equity Armor Investments.

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“Bitcoin is sort of becoming the new VIX, in sort of getting ahead of credit risk in the banking industry,” Stutland said on “Fast Money” on Tuesday.

The CBOE Volatility Index, or VIX, is a long-held measure of volatility and fear in the marketplace illustrated by way of S&P 500stock options prices. The index is sometimes referred to as the market’s “fear gauge.” But Stutland told CNBC that bitcoin is just as good of an indicator.

“There is huge correlation right now between VIX and bitcoin 30 days ago, 30 trading days ago, that is starting to measure out credit risk in the market,” Stutland said. “That’s what cryptocurrency is becoming. It’s becoming a way to sort of de-risk yourself from credit risk in the banking industry.”

Stutland said that makes sense considering cryptocurrency is still an unregulated way for investors to transfer capital.

“Bitcoin is a way to for investors to basically move their money off the balance sheets of banks and into their own wallets,” he said. “Essentially storing their money under their pillow in the form of virtual currency.”

And investors are more likely to be cautious with their money when banks have increased credit risks, Stutland said.

“As credit risk increases we get more volatility in the market,” he said.

The VIX shot up to highs of 18.39 Tuesday, from Friday’s lows of 12.59. The market also had a turbulent day Tuesday. All three major indexes closed lower, with the Dow Jones Industrial Average down nearly 500 points at its lows.

Bitcoin, priced around $7,500 6:30 p.m. ET Tuesday, down from nearly $9,000 a month ago or close to $10,000 on May 5.

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