The correlation between bitcoin and the Dollar Index has reached its most extreme level in almost four years, with a 30-day correlation coefficient of -0.90, indicating a strong inverse relationship. This means that when the dollar weakens, bitcoin tends to gain, and vice versa. The coefficient of determination suggests that around 81% of bitcoin's short-term price movements are statistically linked to changes in the Dollar Index. However, it's essential to consider that this reading can be influenced by bitcoin's 24/7 trading structure, which may not be mirrored in the Dollar Index's weekday-only trading.
Bitcoin's recent rally has stalled after reaching highs above $79,000, coinciding with the Dollar Index bouncing back to 98.75 from its April 17 low of 97.63. The outlook for the Dollar Index appears to be supported by broader macro risks, including elevated oil prices and the ongoing U.S.-Iran standoff.
Analysts note that these macro risks could continue to pose a headwind for bitcoin's rally, as they keep the inflation channel alive and prevent risk premia from fully unwinding. Despite this, sustained inflows into U.S.-listed spot exchange-traded funds (ETFs) are helping to support prices.
However, industry leaders remain cautious, with some predicting that bitcoin may not see a meaningful recovery until October or November, aligning with its four-year reward halving cycle. The current price action is also seeing whales and long-time holders selling into ETF-driven demand. Additionally, the ether-bitcoin ratio has fallen nearly 3% to its lowest level since March 15, confirming a downside break from the short-term ascending channel and pushing the ratio back below the broader downtrend line.
This breakdown reinforces bearish momentum and increases the likelihood of further downside or extended consolidation in the ETH/BTC pair, indicating continued underperformance of ether relative to bitcoin.