A stronger dollar is a weaker threat to bitcoin than traders think

The U.S. Dollar Index (DXY) is rallying, which is usually seen as bad news for bitcoin $BTC$83,796.11 and other dollar-denominated assets such as gold. The data suggest the link is weaker than that view implies.

DXY, which tracks the dollar against a basket of major currencies, including the euro and the yen, has gained about 2.6% since Sept. 9 and hit a two-month high of 101.69 on Tuesday.

The dollar is the world’s reserve currency and sits at the center of global finance and debt. When it rallies, borrowers with dollar debt face higher repayment costs and tend to cut exposure to risky assets. A weaker dollar has the opposite effect.

So in theory, a stronger dollar should weigh on bitcoin. $BTC‘s rally has indeed stalled since Sept. 21, with prices pulling back to $83,000-$84,000 from nearly $87,500. A firmer dollar may be capping the upside, but the damage so far is small.

Besides, correlation data backs up that resilience. Over the past 90 trading days, daily moves in $BTC and DXY show a correlation of -0.41, according to TradingView data analyzed by CoinDesk. A negative reading means the two tend to move in opposite directions. That is the most negative since February 2023.

However, while the link is real, it is also modest, as the feature image shows. The correlation implies an R-squared of 0.17, meaning DXY accounts for only about 17% of the variation in $BTC‘s daily returns.

The shorter-term reading is noisier. The 30-day correlation is -0.45, but it leans on two days, Aug. 19 and Sept. 3, when $BTC jumped more than 5% as DXY fell. Without them, it drops to -0.19.

Zoom out further and the link looks looser still. Since January 2020, the 90-day correlation has averaged -0.14, and it has turned positive at times, peaking at +0.22 in November 2024.

Bitcoin also shows little notable correlation with U.S. Treasury yields, as CoinDesk discussed recently.

Together with its loose link to the dollar, that supports the case for bitcoin as a portfolio diversifier, an asset that moves largely on its own drivers. Whether that independence lasts is worth watching. Stay alert!