Bitcoin and the US dollar rise at the same time. Since the beginning of August, BTC has risen from around $63,000 to almost $87,000 before returning to around $84,600. However, the DXY is also on an upward slope. Having fallen towards 98.4 at the beginning of September, the dollar index is now moving above 101. A rather unusual situation for two assets whose movements have often been opposite.
In brief
- Bitcoin has retained most of its rise since the beginning of August.
- The DXY rallied from 98.4 to over 101 in September.
- The inverse correlation between BTC and dollar temporarily fades.
Bitcoin holds as dollar regains strength
In February, the strength of the dollar weighed heavily on Bitcoin and the crypto market. Seven months later, the scenario is different. Bitcoin was still worth around $63,000 at the start of August. BTC then rose to $70,000, then $80,000, before recently reaching around $87,000. It is now trading around $84,600.
However, the dollar has not remained still. The DXY had been falling for much of the summer, from around 101.6 in July. At the beginning of September, it fell to around 98.4. The movement then reversed and the index returned to 101.
Usually, the rise of the greenback is not great news for Bitcoin. A strong dollar can make alternative assets less attractive and sometimes accompanies a decline in risk appetite. This time, BTC returned almost nothing. It remains more than $20,000 above its level from early August.
BTC also benefits from its own engines
The DXY obviously does not alone explain the price of bitcoin. The last sessions were a rather stark reminder of this. When BTC approached $87,000, almost $1 billion in crypto positions were liquidated. Around 900 million concerned short positions.
Traders who were betting on a decline therefore unwillingly participated in the rise by buying back their positions. Bitcoin then lost some of the ground it had gained. On September 24, it fell as low as $83,508 after failing to hold on to $87,000. Around $583 million worth of positions were still liquidated across the entire crypto market.
Lots of movement in a few days. This also complicates the reading of the relationship with the dollar. A correlation does not force two assets to constantly move in opposite directions. Over several cycles, BTC and DXY experienced periods of strong negative correlation, then episodes where this relationship became much weaker.
Periods of positive correlation have even existed before. The current sequence could simply be another. To speak of a real break, we would have to see the dollar continue to advance for several weeks while Bitcoin maintains its gains. Not yet.
The Fed remains in the Bitcoin equation
The next chapter will still play out largely in the United States. The Fed just raised rates by 25 basis points, bringing their range to 3.75–4%. However, bitcoin reacted little in the first hours. BTC remained relatively stable around $76,300 despite the decision.
A few days later, it was approaching $87,000. Upcoming US data on inflation, employment and rates may further change the relationship between Bitcoin and the greenback. They directly influence the DXY, bond yields and investors’ appetite for risky assets.
For now, the numbers remain simple. BTC is around $84,600 after approaching $87,000. The DXY rises above 101 after falling to 98.4 earlier this month. The dollar is rising. Bitcoin still refuses to give in.
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