Despite the significant decline in the U.S. dollar index in recent weeks, the expected parabolic growth of Bitcoin has not occurred. This article examines the causes of such behavior and its potential consequences.
The Historical Bitcoin-Dollar Index Relationship
On March 7, 2024, the U.S. dollar index fell to 103.60, from 107.6 on February 28, marking a nearly 4% decline in a few days. Historically, this situation creates a favorable environment for Bitcoin, generally considered a safe haven against the weakening dollar. Until mid-2024, the inverse correlation between DXY and Bitcoin was almost a certainty for analysts.
The Reasons for the Current Discrepancy
Several macroeconomic factors explain Bitcoin's current underperformance despite the dollar's weakness. Analyst @21_XBT identifies customs tariffs, Department of U.S. Government Efficiency, yen carry trade, bond yields, and fears of economic growth as short-term disruptive elements.
Bitcoin's Long-term Prospects
Bitcoin's long-term fundamentals remain strong despite the temporary decoupling from DXY. Analyses indicate global financial conditions are rapidly easing, which should ultimately benefit assets like Bitcoin.
As central banks adopt more expansionary monetary policies to stimulate the economy, current macroeconomic fears will likely fade. Analysts predict Bitcoin could reach $126,000 by June 2025, confirming the current decoupling from the dollar is temporary.
