For bitcoin traders, the direction of the Dollar Index (DXY), a measure of the dollar’s strength against a basket of other currencies, hasn’t mattered much in nearly four years.
That’s because the 30-day correlation coefficient between the two now stands at -0.90, according to TradingView, the most negative reading since September 2022. A reading below 0 indicates an inverse relationship: when the dollar weakens, bitcoin rises and vice versa.
However, keep in mind that the reading, while widely tracked, can be affected by bitcoin’s 24/7 trading structure, especially weekend price action that is not reflected in the Dollar Index’s weekday-only trading.
The coefficient of determination, or correlation squared, comes in at 0.81, implying that around 81% of bitcoin’s short-term price movements are statistically linked to movements in the index.
Notably, bitcoin’s rally has stalled since hitting highs above $79,000 on Wednesday. This comes as the DXY jumped to 98.75 from an April 17 low of 97.63.
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The outlook for the dollar index appears to be underpinned by broader macro risks, including elevated oil prices linked to tanker traffic disruptions in the Strait of Hormuz and a continued US-Iran standoff over ceasefire talks.
“Macro is still trying to lean on it [BTC’s continued rally]. Oil has risen for five straight sessions and Hormuz remains effectively capped. That should be a headwind because it keeps the inflation channel alive and prevents the risk premium from fully unwinding,” analysts at Marex said in an email.
One positive is the continued approach to the US-listed spot exchange-traded funds (ETFs). While keeping prices supported, industry leaders are still taking a cautious approach.
Anthony Scaramucci, founder of SkyBridge Capital, said that bitcoin may not see a meaningful recovery until October or November, and the current price action aligns with BTC’s four-year reward halving cycle. He said whales holding large numbers of BTC and long-time holders have continued to sell to ETF-driven demand. Pay attention!
Read more: For analysis of today’s activity in altcoins and derivatives, see Crypto Markets Today. For a comprehensive list of events this week, see CoinDesk’s “Crypto Week Ahead.”
What is trending
- Pentagon email floats suspending Spain from NATO, reassessing Britain’s Falklands claim over Iran war rift (Reuters): A memo circulating at high levels in the Pentagon lays out options for punishing NATO allies who denied access, basing and overflight rights to the Iran campaign.
- Morgan Stanley Launches Stablecoin Reserves Portfolio, a Money Market Fund for Issuers (CoinDesk): Morgan Stanley Investment Management unveiled MSNXX, a $1 NAV government money market fund that holds only government bonds and government repos, built to meet the Genius Act’s reserve requirements.
- Wisconsin sues Kalshi, Coinbase, Polymarket, Robinhood and Crypto.com over prediction markets (CoinDesk): Attorney General Josh Kaul’s complaint alleges that sports event contracts are unlicensed gambling, citing the platforms’ own marketing.
- DOJ Arrests Special Forces Soldier Who Made $400,000 on Polymarket Bets on Maduro’s Capture (ABC News): The master sergeant was involved in the January operation and placed about $33,000 in bets hours before Trump announced the capture, netting more than $400,000. This is believed to be the first US insider trading prosecution linked to a prediction market.
Today’s signal
The chart shows daily fluctuations in the ether-bitcoin (ETH/BTC) ratio in candlestick format since last July.
This week, the ratio fell nearly 3% to 0.02965, the lowest since March 15. The move has two bearish implications.
First, it confirms a downward break from the short-term ascending channel that had guided the recovery from the low in early February. Second, it pushes the ratio back below the broader downtrend line that has defined the decline since August.
This breakdown reinforces bearish momentum and increases the likelihood of further downside or extended consolidation in the ETH/BTC pair, meaning it points to continued underperformance of ether relative to bitcoin ahead.
