Bitcoin (BTC) has decreased by 12%, reaching almost $ 94,000 since March 2. Interestingly, during the same period, the US dollar has been weakened in foreign currency baskets, which is generally considered a positive signal for lack of assets such as BTC.
Investors are now embarrassed why Bitcoin has not reacted positively to the decrease in DXY, and in this trend that can be the next factor that can be separated.
US dollar index (DXY, left) vs. bitcoin/USD (right). Source: TradingView / COINTELEGRAPH
By mid -2012, the US dollar index (DXY) had a reverse relationship with Bitcoin, which often increased cryptocurrency when the dollar weakened. During that period, Bitcoin was widely seen as a hedge to inflation due to lack of correlation with the stock market and a fixed monetary policy similar to digital gold.
However, correlation does not suggest causal relationships, and the last eight months have shown that the theoretical basis for Bitcoin investment evolves over time. For example, some analysts argue that as the central bank adjusts the economic policy, the price of Bitcoin is consistent with global financial supply, while other analysts emphasize the role of abnormal money and enable free transactions for both governments and individuals.
Bitcoin gain due to DXY weakness
Julien Bittel, head of Macro Research at Global Macro Investor, pointed out that the US dollar index has only occurred three times in the last 12 years until February 28, 107.6.
source: minuscule
Bittel’s posts on X have surged since the last decline of the DXY index in November 2022, and the US dollar has dropped from 99.5 to 95 in the early days of the Covid-19 crisis since the March 2020 event. His analysis says, “I emphasize that financial conditions are leading risky assets for months. The financial conditions are now relaxed and fast. ”
Bittel’s opinion is very optimistic about Bitcoin’s price, but it took six months to embody the positive impact of the US dollar weakness in the past. According to the user @21_xbt, Bitcoin’s current lowness may be caused by “short -term macroscopic fear.”
source: 21_xbt
Analysts briefly quoted some reasons, including Bitcoin’s recent price weaknesses, “Duty, Doge, Yen Carry Trade, Return, DXY, and Growth”, but the price could not be gained because the price of Bitcoin did not change.
For example, the reduction of the US government efficiency (DOGE) is very positive for the medium -term economy because it reduces overall debt -to -pay payments and secures resources for productivity boothing measures. Similarly, if the Trump administration increases US exports and achieves a more favorable trade balance, tariffs can be beneficial.
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Measures taken by the US government prevents excessive but continuous growth, causing short -term pain, lowering the yield of the US Treasury Note, making it cheaper. But as a preliminary currency in the world, there is no sign of weakening the role of the US dollar or reducing demand for US treasures. As a result, the recent decrease in the recent DXY index is not directly related to Bitcoin’s charm.
As time goes by, as the user @21_xbt pointed out, the central bank adopts more expansion monetary policies to stimulate the economy, and the fear of macro economic fear will disappear. This allows Bitcoin to be separated from the DXY index and set a new highest stage in 2025.
This article is for general information purposes and should not be considered legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.