The correlation between bitcoin (BTC) and the Dollar Index (DXY) has reached its most extreme level in nearly 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. However, it's essential to consider that this reading can be influenced by bitcoin's around-the-clock trading, which may not be mirrored in the Dollar Index's weekday-only trading.
The coefficient of determination, or correlation squared, is 0.81, suggesting that approximately 81% of bitcoin's short-term price fluctuations are statistically linked to moves in the index. Notably, bitcoin's recent rally has stalled after reaching highs above $79,000, coinciding with the DXY's bounce to 98.75 from its April 17 low of 97.63.
This development comes as 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 at Marex noted that 'macro is still trying to lean against' bitcoin's continued rally, citing the rise in oil prices and the constraints in the Strait of Hormuz as headwinds that could keep inflation concerns alive and prevent risk premia from fully unwinding.
On a positive note, sustained inflows into U.S.-listed spot exchange-traded funds (ETFs) have been supporting prices. However, industry leaders remain cautious, with Anthony Scaramucci, founder of SkyBridge Capital, suggesting that bitcoin may not see a meaningful recovery until October or November, aligning with BTC's four-year reward halving cycle. Scaramucci also noted that whales and long-time holders have continued to sell into ETF-driven demand. The ether-bitcoin (ETH/BTC) ratio has fallen nearly 3% to 0.02965, its lowest 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.