Kuppy points out that the percentage of hedge fund portfolios holding cash is higher than at any time since the dot-com bubble back in 2000. When these peaks happen and hedge funds rotate back into stocks, the market bottoms out and has a nice rally. .
We can also see this effect in the bitcoin market.
This chart is a little busy, but the top panel is the “stablecoin dominance”, as I’ve called it, the ratio of the stablecoin market cap to bitcoin’s market cap. It is a proxy for a “cash position” in the bitcoin market. The bottom panel is the bitcoin price. At relative peaks in the stablecoin ratio, bitcoin falls in price because these stablecoins can rotate to buy bitcoin and vice versa.
The US dollar
There has been a lot of talk about the strengthening of the dollar. We’re the only bitcoin podcast to unequivocally call for a strong dollar in the last two years, and boy were we right.
I do not expect the dollar to sell off dramatically after the parabolic rally, but to establish a new higher range, perhaps between 100-115 on the US Dollar Index (DXY).
I emphasize that bitcoin does not need a weakened dollar to explode higher. In fact, if you look at the history of bitcoin charted with the DXY, you can see that the dollar is establishing a new higher area where bitcoin is selling off. After periods of a rising dollar, bitcoin tends to take off. I had not prepared a chart to show this during the live broadcast, but it is included below.
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The pink zones indicate periods of rising dollar and falling bitcoin. The black arrows indicate rising bitcoin amid a steady dollar in a higher range. It’s important to note that both bitcoin and the dollar have rallied over the past 10 years, just on slightly different schedules.
Finally, we take a look at the euro and discuss how and why it is in the most trouble of the major currencies. We mention fragmentation risk several times. I recently created a podcast episode dedicated to that topic.
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This is a guest post by Ansel Lindner. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.
