The relationship between bitcoin (BTC) and the Dollar Index (DXY) has become increasingly significant for traders, with the 30-day correlation coefficient reaching -0.90, the most negative reading since September 2022. This indicates a strong inverse relationship, where a weaker dollar leads to bitcoin gains and vice versa. The coefficient of determination stands at 0.81, suggesting that approximately 81% of bitcoin's short-term price movements are statistically linked to the Dollar Index. However, it is essential to consider that this reading can be influenced by bitcoin's 24/7 trading structure, particularly during weekends when the Dollar Index is not trading.
Bitcoin's rally has stalled after reaching highs above $79,000, coinciding with the DXY 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 due to disruptions in the Strait of Hormuz and ongoing U.S.-Iran tensions.
Analysts at Marex noted that macro factors are still exerting pressure on bitcoin's continued rally, citing the rise in oil prices and the constraints in the Strait of Hormuz as headwinds that keep inflation concerns alive and prevent risk premia from fully unwinding. Despite this, sustained inflows into U.S.-listed spot exchange-traded funds (ETFs) have provided price support. Industry leaders remain cautious, with Anthony Scaramucci, founder of SkyBridge Capital, predicting that bitcoin may not experience a significant recovery until October or November, aligning with the cryptocurrency's four-year reward halving cycle.
Scaramucci also noted that whales and long-time holders have continued to sell into ETF-driven demand.