The correlation between bitcoin's price and the Dollar Index has reached its most extreme level in nearly four years, with a 30-day correlation coefficient of -0.90. This indicates a strong inverse relationship, where a weaker dollar leads to bitcoin gains and vice versa. The coefficient of determination suggests that around 81% of bitcoin's short-term price movements are statistically linked to the Dollar Index.
However, the recent bitcoin rally has stalled, coinciding with a bounce in the Dollar Index. Broader macro risks, including high oil prices and geopolitical tensions, appear to be supporting the Dollar Index.
Analysts note that these factors may continue to pose a headwind for bitcoin's rally. Despite sustained inflows into US-listed spot ETFs, industry leaders are adopting a cautious approach, with some predicting a meaningful recovery only in the later part of the year.