The direction of the Dollar Index, a gauge of the US dollar's strength against other currencies, has become increasingly relevant for bitcoin traders, with the 30-day correlation coefficient between the two reaching -0.90, the most negative reading since September 2022. This implies 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 24/7 trading structure. The coefficient of determination indicates that roughly 81% of bitcoin's short-term price movements are statistically linked to the Dollar Index.
Notably, bitcoin's rally has stalled after reaching highs above $79,000, coinciding with the DXY bouncing to 98.75 from its April 17 low of 97.63. Broader macro risks, including elevated oil prices and the US-Iran standoff, appear to be supporting the outlook for the Dollar Index. Analysts suggest that these factors may pose a headwind for bitcoin's continued rally, as they keep inflation concerns alive and risk premia from unwinding.
Despite this, sustained inflows into US-listed spot exchange-traded funds have kept prices supported. 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 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.