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- The US dollar index reached its highest level since November 2022.
- BTC’s correlation with DXY was only around 0.11 at the time of publication.
The US dollar index (DXY) has risen a few notches, boosted by that of the Federal Reserve signals that another interest rate increase was imminent before the end of 2023.
How much are 1,10,100 BTCs worth today?
According to a TradingView chart, the rally has been going on for the past two months. The index, which measures the strength of the USD against a basket of six foreign currencies, reached a ten-month high at the time of writing.
Source: Trading View/US Dollar Index
Bitcoin is immune to the USD rise
Historically, the USD, which is considered a safe haven, has had an inverse correlation with supposedly risky assets such as stocks and cryptocurrencies. However, recent developments seemed to contradict this pattern. At least, partially.
According to analytics platform Santiment, while the USD has risen, Bitcoin has risen [BTC] has remained stable in recent weeks. The king coin has been hovering in and around the $26,000 level for most parts, as shown below.
Source: Santiment
On the contrary, major stock indices such as the S&P 500 declined significantly, remaining true to historical trends.
By discovering Bitcoin’s resilience in a deteriorating macroeconomic environment, Santiment raised the possibility that BTC would break out of persistently tight trading margins once DXY’s rally dissipates.
Decoupling of the TradFi markets
According to another popular research firm IntoTheBlock, Bitcoin’s relationship with traditional financial indicators has changed dramatically in recent weeks.
BTC’s correlation with DXY was only around 0.11 at the time of publication. A week ago it was even zero. Needless to say, the decoupling played a role in isolating BTC from DXY’s rally.
Source: IntoTheBlock
Moreover, BTC’s relationship with the main drivers of the US financial market – Nasdaq 100 and S&P 500 – turned negative. This implied that if the price of one asset rises, the other falls and vice versa.
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Now BTC has been labeled as a “risky asset” and tortured with the stock market for most of its existence. However, its negative correlation could effectively project it as a safe haven, similar to gold.
At the time of writing, BTC was exchanging hands at $26,411, per Santiment. Given its stability in the face of a rising dollar, investor sentiment turned from negative to positive for the king coin.
Source: Santiment