Bitcoin Rebound Suggests US Dollar Bear to Return Soon

Bitcoin made a closing high on December 18, 2017 at $18,764 and then proceeded to fall to the closing low for the year, $6,604.48 on April 6, 2018. Since then, it has rebounded almost 50% to today’s level of $9,670, having broken back through the 50-day moving average.

For the last 18 months Bitcoin has maintained a fairly close relationship with the US Dollar Index. In 2017, while Bitcoin surged by over $8,000, the USD Index fell a bit over 10%, from 103 to 88. The USD Index made an attempt at a low on February 2, 2018, but ultimately bottomed on February 16, 2018 at 88.59. So, the USD Index peaked roughly 45 days after the peak in Bitcoin.

If these patterns repeat, and the relationship between Bitcoin and the USD Index holds, we should expect a peak in the USD Index sometime in the next couple weeks.

If Bitcoin keeps ramping from here, our conviction that the USD bear market is about to return will be strengthened. This suggests a continued focus on foreign denominated assets in the equity, currency and fixed income domains.