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Bitcoin vs The U.S Dollar - The Inverse Correlation Explored

  • Writer: GoM3z
    GoM3z
  • Jul 3, 2024
  • 2 min read

We often talk about the inverse correlation between Bitcoin and the U.S Dollar (DXY), but how accurate is it?


Often times, we actually have a positive Bitcoin Dollar correlation, the Dollar strengthens, BTC also goes up, and vice-versa. In that sense, you can't always depend on the DXY for lower timeframe signals. But, when you zoom out to the high timeframes the negative correlation is obvious.

Bitcoin vs the U.S Dollar
Bitcoin vs the U.S Dollar - Weekly timeframe
“We're entering that period of the cycle when we would expect the supply of Dollars to start to expand, sending the DXY down, and BTC up against USD...”

The inverse relationship between BTC and the DXY is most evident when zoomed out to the Weekly and higher:

  • When BTC is topping out for the cycle, generally the Dollar is bottoming out, i.e. when the dollar is weakest, BTC is at it strongest part of the bull cycle.

  • Inversely, when the Dollar tops out, BTC is in the depths of a bear cycle and bottoming out.


This is the U.S Dollar liquidity cycle in full effect - Financial liquidity tends to move in a 4-5 year global cycle. When the money supply expands due to government spending and/or Fed QE, the U.S Dollar dumps and Bitcoin pumps.


We're entering that period of the cycle when we would expect the supply of Dollars to start to expand, sending the DXY down (and BTC up against USD). This is the usual 4(ish) year cycle.


The strength shown by the Dollar recently is mostly due to the fact that other major trading partners have already started to reduce rates and easing financial conditions, forcing foreign currency holders to dump their currency in favour of the US Dollar. This trend should stop by the end of the year when the U.S is expected to also begin to cutting rates, QE won't be far behind - The Fed has already started to tapper QT. This period of rapid Dollar debasement generally lasts around a year - This is when Bitcoin enters it's parabolic stage of the Bull Cycle.

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