The USD Index (DXY) - the measure of the strength of the US dollar - has been on an 8-week consecutive upward trend, officially setting a new two-year high. This has left many investors puzzled as they search for an inverse correlation with the price of Bitcoin.
Here are the observations of BeInCrypto on the DXY and the views of experienced investors on this phenomenon.
DXY officially sets a new two-year high
This month, the DXY has reached over 108 points, up from the 100.2 points at the end of September. This is the longest consecutive weekly gain in 2024, at 8 weeks. Typically, the strength of the US dollar rising is a bad sign for risky assets like Bitcoin.
Correlation between Bitcoin price and DXY. Source: Into The CryptoverseBut if observed in parallel with the Bitcoin price, in this November, Bitcoin has risen in parallel with the DXY and approached the historical $100,000 level. This move is completely contrary to the previous predictions of many analysts in the industry.
The DXY and Bitcoin have their own separate drivers that have blurred the inverse correlation. For the DXY, Trump's victory has contributed to the rise in the strength of the US dollar, thanks to Trump's promises during the election campaign, despite the Fed's two interest rate cuts.
"The US dollar is still rising in price despite the Fed's rate cut, due to the policies that Donald Trump has announced during the presidential election campaign with the goal of 'making America great again'. That is, Trump will impose tariff and non-tariff quotas to limit exports to the US, protecting domestic businesses." - Assoc. Prof. Dr. Nguyen Huu Huan evaluated.
For Bitcoin, this asset has never had as many strong supporting drivers as it does now. Bitcoin is not only receiving capital inflows through Bitcoin ETFs, but is also receiving strong support from new senior officials under the Trump administration in the future.
Investors change their view on Bitcoin: No longer a risky asset?
Seeing the apparent disappearance of the inverse correlation between the DXY and Bitcoin, many investors are expressing a positive sentiment, changing their view on Bitcoin.
"The US dollar is rising, which is usually not good for 'risky assets'. Bitcoin doesn't care. Maybe, just maybe... Bitcoin is not correlated and is not a risky asset?" - The Wolf Of All Streets asked.
Some views agree with the above. Bitcoin is even being planned to become a strategic reserve of the United States, which is something that hardly any investor dared to think of just a year ago.
"Risky assets fluctuate with the US dollar, but Bitcoin is thriving thanks to its own fundamental principles: scarcity, decentralization and trustless security. Perhaps it's time for the world to stop categorizing Bitcoin as a 'risky asset'. This is a monetary revolution, not a trading activity. The correlation (with DXY) is fleeting. Bitcoin's independence is eternal. Watch the signals, not the noise." - LibertasProj commented.
At the time of writing, the Bitcoin price is still fluctuating above $97,000, with a market sentiment of "extreme greed", and just a 3% increase away from reaching the 6-digit price level.
Also Read: Bitcoin (BTC) Faces a Massive Sell Wall at $100,000
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