Bitcoin Shows Unexpected Movement Compared to the DXY Index

Over the past 24 hours, Bitcoin has been trading around the $84,000 mark, showing a slight increase. However, this time, market dynamics differ from previous trends.

Typically, when the U.S. Dollar Index (DXY) weakens, Bitcoin experiences strong price gains. However, since March 2, Bitcoin has dropped 12% after nearly reaching $94,000, despite the U.S. dollar losing value against other currencies—an event that usually benefits scarce assets like Bitcoin.

Before mid-2024, Bitcoin and DXY had a clear inverse relationship: when the dollar weakened, Bitcoin surged. At that time, Bitcoin was regarded as “digital gold,” serving as a hedge against inflation due to its fixed supply and independence from the stock market.

However, correlation does not imply causation. Over the past eight months, Bitcoin’s investment drivers have shifted significantly. Some experts believe Bitcoin’s price movements are now influenced by global liquidity conditions, especially as central banks adjust economic policies. Others emphasize Bitcoin’s growing role as a censorship-resistant financial tool, providing financial freedom for both individuals and institutions.

Recently, Bitcoin underwent a sharp correction, dropping up to 30% due to increased selling pressure from short-term holders. According to Bitfinex analysis, Bitcoin fell from its all-time high of $109,590 on January 20 to a low of $77,041 during the week of March 9-15. Investors who bought within the past 7-30 days are now facing unrealized losses and are more likely to sell, adding further pressure to the market.

Notably, capital outflows from Bitcoin ETFs have continued, totaling approximately $920 million over the same period, signaling that institutional investors have yet to return with sufficient buying power to absorb supply.

Bitfinex analysts highlight that a key factor to watch is whether institutional demand rebounds at current price levels. If strong buying interest emerges, it could help stabilize the market. Historical data also suggests that 30% corrections often mark the bottom before Bitcoin enters a new uptrend. If Bitcoin holds steady at this level, a strong recovery could be on the horizon.