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Historically, whenever the US Dollar Index (DXY) declines, Bitcoin has taken advantage, surging upward. But this time, the script has flipped. Instead of rallying, Bitcoin has dropped over $10,000, falling from $94,000 on March 2 to its current level. So why isn’t Bitcoin capitalizing on the weakness of the dollar?

Why Is Bitcoin Struggling?

Up until mid-2024, the relationship between Bitcoin and the US Dollar Index was clear:

✅ When the dollar weakened, Bitcoin surged.
✅ When the dollar strengthened, Bitcoin struggled.

For years, Bitcoin was hailed as an inflation hedge – a decentralized asset with a fixed supply that offered a “better version of gold.” Investors viewed it as a way to escape fiat currency devaluation, and its low correlation to traditional markets made it an attractive alternative.

But as analyst Marcel Pechman explains, things have changed:

“Just because Bitcoin and the dollar used to move in opposite directions doesn’t mean it will always be the case. In the last eight months, Bitcoin’s investment thesis has evolved. Some argue it reacts more to global liquidity, while others focus on its decentralized nature.”

In short, the old rules don’t apply anymore.

Bitcoin May Take Time to React to a Weak Dollar

Julien Bittel, head of macro analysis at Global Macro Investor, points out that a major drop in the US Dollar Index has only happened three times in the last 12 years.

On Elon Musk’s X (formerly Twitter), Bittel noted that Bitcoin saw strong rallies after the last two major dollar declines – once in March 2020 and again in November 2022.

The issue? Monetary shifts don’t impact markets overnight.

Imagine if mortgage rates jumped to 100% today and dropped to 4% tomorrow – housing wouldn’t recover instantly.

Financial conditions take time to filter through markets, and it could be months before Bitcoin benefits from the weaker dollar.

Short-Term Investors Are Pushing Bitcoin Lower

While Bitcoin has historically rebounded from corrections, Bitfinex analysts note that short-term traders are responsible for the current selling pressure.

Bitcoin recently suffered its second-largest correction of this bull cycle, dropping 30% from its all-time high of $109,590 on January 20 down to $76,700.

Who’s selling?

Short-term investors who bought Bitcoin within the last 7-30 days.
Newcomers who panic at the first sign of a downturn.

According to Bitfinex, this group consists of traders who lack experience in handling Bitcoin’s volatility. When they see prices falling, their instinct is to hit the sell button rather than ride it out.

Adding to the bearish pressure, capital outflows from Bitcoin ETFs have been worrying. From March 9 to March 15, a total of $920 million flowed out of Bitcoin ETFs – a sign that institutional investors aren’t stepping in to support the market yet.

At $83,400, Bitcoin has managed to recover slightly, but it will take a clear breakout above $100,000 to truly revive bullish sentiment.

Have We Hit the Bottom?

Despite all the negativity, Bitfinex remains cautiously optimistic. Their research highlights a historical trend. Whenever Bitcoin corrects by 30% in a bull market, it often finds a bottom before resuming its uptrend.

“If Bitcoin stabilizes at this level, history suggests that a strong recovery could follow,” says Bitfinex.

But…

Macroeconomic risks remain high.
Global financial markets are still uncertain.
Donald Trump’s policies on trade wars and geopolitical tensions could impact market sentiment.

The Waiting Game

While Bitcoin is currently under pressure, it’s worth noting that:

✔️ A weaker dollar typically leads to better financial conditions, which could benefit Bitcoin in the coming months.
✔️ Corrections are normal in a bull cycle – a 30% drop has often signaled the bottom.
✔️ Institutional buyers will likely return if Bitcoin stabilizes, pushing prices higher again.

For now, patience is key. The market remains volatile, but if historical trends hold, Bitcoin may soon be back on the path to new highs.

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Roman B.

I have 6 years of writing experience on several leading websites dealing with cryptocurrencies and other investments. I have been in the Web3 sector for a similar amount of time and have collaborated on several projects from NFT to P2E. My previous experiences: Business2Community.com, TradingPlatforms.com, CryptoSvet.