The original Bitcoin promise was rebellion: digital gold, inflation protection, an output of the fiduciary system. But if the latest report by Binance Research is a clue, it could today play a different role: not to fight the dollar, but support it.
In short
- The correlation of bitcoin with the US dollar has become positive, reaching its highest level for several years at 0.25, which suggests that BTC is now moving with the dollar, not against it.
- Institutional flows to Bitcoin ETF and the flambé of Stablecoins (more than $ 250 billion today) bring the crypto liquidity markets closer to USD.
- Binance claims that BTC no longer acts as protection, but as a macro asset aligned with risk cycles and the strength of the dollar.
What's going on with Bitcoin
Over the past two months, BTC correlation with the US dollar index (DXY) has climbed 0.25, its highest level among all the main macro active. It is not a huge figure, but it is a change for an asset long presented as a counterweight at the risk linked to the dollar, according to the new Binance analysis report. This suggests that Bitcoin reacts more and more to the same forces as the dollar: macroeconomic uncertainty, “higher interest rate” and requests liquidity by investors.
This dynamic has not come out of nowhere. More than $ 2.4 billion flocked to Bitcoin ETF in cash in just eight days this month, even if the big titles on war and world instability shaken the general markets. These are flows from institutional beneficiaries in search of yield, positioning or diversification. When the dollar strengthens, they do not remove their BTC money. They invest there.
In addition, the sharp increase in stablecoins is strengthening the grip of the dollar on the crypto markets. The US Senate has just adopted the Genius law, a bill on stablecoins which could authorize banks, fintechs, and even traders to issue digital dollars fully reserved and in accordance with anti-flowage control. Already, the total offer of Stablecoins has increased by 22.5 % since the start of the year, exceeding 250 billion dollars, with more than 20 billions of dollars in volume on-chain.
What it means for the market
Bitcoin lives today in an ecosystem increasingly dominated by the dollar. The majority of crypto, regulations, and even user savings are made via tokens indexed to the dollar. And if the increase in Circle's course, the USDC integrations of Stripe, or the Blockchain “JPM-D” pilot project of JPMorgan are indicators, this trend accelerates.
At the same time, Bitcoin moves away from his old correlations. Its link with actions, including the S&P 500, fell to only 0.21. His relationship with gold, another “hard active”, is barely due to the negative territory. Instead, the most constant opposite signal from Bitcoin comes today from US treasury bills, where the increase in yields (and inflation fears) continue to cause BTC purchases. But even this effect begins to fade.
What do we have left then? A currency that no longer covers nothing, but which continues to experience funding, adoption and relevance. Bitcoin is no longer the foreigner shouting the fall of the trustee. It becomes a full macro asset, according to the tides of global liquidity and reacting to the same signals which influence the FX desks and central banks.
This reflects the current market situation. The lines between traditional finance and crypto fade quickly. Bitcoin, for better or for worse, is now part of the machine.
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