Currency Trading

What is the interplay among exchange-traded fund (ETF) proxies for the U.S. dollar, gold and crude oil? Do changes in the value of the dollar lead or lag those in hard assets? To investigate, we relate returns of Invesco DB US Dollar Index Bullish Fund (UUP) to those for each of:

1. SPDR Gold Shares (GLD).
2. United States Oil Fund, LP (USO).
3. Invesco DB Commodity Index Tracking Fund (DBC), as a broader hard asset proxy for comparison.

We look at contemporaneous and lead-lag relationships. Using monthly dividend-adjusted prices for these funds during March 2007 (limited by UUP) through February 2026, we find that: Keep Reading

A subscriber asked about an assertion that bitcoin (BTC) price trend/return predicts return of the S&P 500 Index (SP500). To investigate, we relate BTC returns to SP500 returns at daily, weekly and monthly frequencies. We rationalize the different trading schedules for these two series by excluding BTC trading dates that are not also SP500 trading days. Most results are conceptual, but we test three versions of an SP500 timing strategy based on prior BTC returns focused on compound annual growth rate (CAGR) and maximum drawdown (MaxDD). Using daily SP500 levels and (pruned) BTC prices during 9/17/2014 (limited by the BTC series) through 3/4/2026, we find that:

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Are there cryptocurrencies that are so alike that they generally track each other and reliably revert whenever they diverge? In their December 2025 paper entitled “Pairs Trading in Crypto”, Sasha Stoikov, Dora Xu, Shijie Shao, Yourui Wang, Tongshu Zhang and Jinxuan Hu show how to identify cryptocurrency pairs with stable relationships and execute mean reversion strategies in real time. Specifically, they:

• Identify pairs to trade by combining correlation behaviors, structural metadata and stability diagnostics.
• Generate entry thresholds, exit rules and risk controls (stop-loss, pair suspension and pair abandonment) for long-short trades that exploit overvaluation and undervaluation of pairs based on rolling window divergences.

Starting with hourly data for a sample of 543 cryptocurrency perpetual futures contract series (147,153 potential pairs), with 800 days through February 2025 as a training set and March through September 2025 as a test set (plus some short live tests during late November and early December 2025), they find that:

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Should investors who believe that the U.S. dollar (USD) is doomed by deficits/debt consider a momentum strategy holding the USD hedge that most recently performed best? To investigate, we test a simple momentum strategy (Winner) that each month holds the one of the following three assets with the highest prior-month return:

• Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) – the safest debasement hedge.
• SPDR Gold Shares (GLD) – a conventional debasement hedge.
• Bitcoin USD Price (BTC-USD) – an innovative debasement hedge.

We focus on compound annual growth rate (CAGR) and maximum drawdown (MaxDD) for performance comparison. We use a equal-weighted, monthly rebalanced (EW) portfolio of the three assets as a benchmark. We commence testing in September 2015 to allow momentum measurement (lookback) interval sensitivity analysis. Using monthly total returns for the above three assets during September 2014 (limited by BTC-USD) through December 2025, we find that: Keep Reading

Is Bitcoin a scarce, valuable asset or a Ponzi scheme? In his December 2025 paper entitled “The Great Bitcoin Debate: Saylor’s Maximalism Versus Schiff’s Monetary Traditionalism”, David Krause examines the debate between Bitcoin maximalists (represented by Michael Saylor) and traditional monetary economists (represented by Peter Schiff), encapsulated as follows:

1. Saylor: Bitcoin’s fixed supply of 21 million coins and decentralized architecture make it superior to both fiat currencies and traditional stores of value, including gold.
2. Schiff: Physical gold’s millennia-long track record, industrial utility and tangible properties make it an authentic inflation hedge, while Bitcoin is a speculative bubble driven by collective belief rather than intrinsic value.

He analyzes the theoretical foundations underlying each position, examines the empirical evidence regarding Strategy’s controversial corporate strategy and reviews the academic and financial industry literature addressing Bitcoin’s dual nature as speculative asset and store of value. Based on these inputs, he finds that: Keep Reading

Does bitcoin now behave like a conventional financial asset? In their short November 2025 paper entitled “From Time-Series Momentum to Size-Factor Comovement: Bitcoin’s Continuing Evolution as a Financial Asset”, Samuel Rosen and Hongcheng Wang investigate the evolution of bitcoin. Specifically, they:

1. Perform autoregressions of weekly bitcoin returns to evaluate time-series momentum at horizons of one to eight weeks.
2. Regress bitcoin returns on returns of U.S. market, size and value equity factors and some financial variables to assess bitcoin behavior in equity context.

To assess changes in relationships over time, they employ rolling windows, split samples and dummy regression variables. Using daily bitcoin returns and monthly returns for the selected equity factors and other financial variables during 2011 through 2024, they find that: Keep Reading

Does bitcoin (BTC) price reliably exhibit momentum or reversion? To investigate, we try three tests:

1. Calculate autocorrelations (serial correlations) between daily, weekly and monthly BTC returns and respective BTC returns for the next 10 intervals (for example, correlation of daily return with returns the next 10 days). Positive and negative correlations suggest momentum and reversion, respectively.
2. Calculate correlations between next-week BTC return and current BTC price relative to its high (percentage below) or low (percentage above) over the last 13 weeks. A positive (negative) correlation to price relative to a recent high or low indicates momentum (reversion).  
3. Calculate average next-week BTC returns by ranked tenth (decile) of BTC price relative to its high or low over the last 13 weeks.

Using daily, weekly and monthly BTC closing prices during September 14, 2014 (the earliest available from the source) through October 22, 2025, we find that:

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What are the essential investment features of crypto-assets? In their October 2025 paper entitled “Cryptocurrency as an Investable Asset Class: Coming of Age”, Nicola Borri, Yukun Liu, Aleh Tsyvinski and Xi Wu synthesize the rapidly growing body of research on crypto-assets into 10 statements summarizing how they behave in aggregate as an asset class, how their markets work and what distinguishes them from traditional asset classes. Using price data from CoinGecko.com for all live and dead crypto-assets with at least 30 daily observations during December 31, 2013 through September 6, 2025, they find that:

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Will bitcoin replace gold as the pre-eminent safe haven asset? In his September 2025 paper entitled “Gold and Bitcoin”, Campbell Harvey compares and contrasts bitcoin and gold as alternative safe haven assets. Based on gold and bitcoin past returns and characteristics/risks, he concludes that: Keep Reading

Do Ethereum (ETH) and Bitcoin (BTC) exhibit a reliable lead-lag relationship? To investigate, we compute:

• Pearson correlations between daily ETH return and daily BTC return for relationships ranging from BTC return leads ETH return by 10 days (-10) to ETF return leads BTC return by 10 days (10).
• Pearson correlations between monthly ETH return and monthly BTC return for relationships ranging from BTC return leads ETH return by six months (-6) to ETF return leads BTC return by six months (6).

Using daily and monthly ETH and BTC prices in U.S. dollars from November 9, 2017 (ETH inception) through September 15, 2025, we find that: Keep Reading