At the moment, there seems to be a general assumption that when the U.S. dollar value increases against other global major currencies, as measured by the DXY index, the impact on Bitcoin (BTC) is negative.
For the past few weeks, analysts and influencers have been issuing alerts about this inverse correlation, which held true until March 2021.
So I guess we’re not all obsessed with $DXY anymore? Because it’s looking super bullish & had provided an almost perfect inverse correlation for over a year. Either way we’re about to find out if $BTC has matured to the point of being uncorrelated. ️ #Banks #Brrrr #Bitcoin pic.twitter.com/gequzmr6p2
— Alex Saunders (@AlexSaundersAU) February 2, 2021
— Henrik Zeberg (@HenrikZeberg) January 2, 2021
However, no matter if you track a 20-day or 60-day correlation, the situation reversed over the past three months.
The correlation indicator (red) has been ranging above 50% since mid-March, indicating that both DXY and Bitcoin have generally followed a similar trend.
The dollar strengthened after the Fed speech
As Cointelegraph reported, May’s Consumer Price Index (CPI) report showed inflation hitting a 13-year high, and Federal Reserve Chair Jerome Powell acknowledged that inflation could run higher than planned in the short term. Still, he clarified that “longer-term inflation expectations are anchored at a place that is consistent with our goal.”
The market gave the Fed a ‘vote of confidence,’ causing the U.S. dollar to appreciate versus major global currencies. Meanwhile, Bitcoin dropped 8% to a $35,300 low on June 18, further reinforcing the inverse correlation thesis.