- A routine Bank of America survey shows stronger-than-usual bearish positioning against the dollar. Institutional investors’ net exposure is as low as it was in 2012.
- The reasons are increasing concerns about a slowdown in the US labor market and fears that the central bank could cut interest rates sooner or more than expected – or both.
Under normal market conditions, such a pronounced dollar weakness would be a strong tailwind for Bitcoin. Historically, BTC has predominantly developed in the opposite direction to the dollar index: if the dollar falls, risk assets such as Bitcoin rise; if the dollar rises, the Bitcoin price falls. This inversely proportional relationship has been a reliable pattern so far.
But since the beginning of 2025 you can no longer rely on it. The dollar index fell more than nine percent in 2024 and recorded further losses in 2025. At the same time, Bitcoin has lost around 21 percent. The 90-day correlation between BTC and DXY has increased to 0.6 – the highest value since April 2025.
This means that both markets are currently moving in sync – the old correlation has been broken. If the new one holds, a further decline in the dollar index would not be a bullish signal for Bitcoin, but rather a burden. Conversely, a dollar rebound triggered by a short squeeze could pull Bitcoin higher.
The extremely one-sided positioning significantly increases the likelihood of such a scenario. As soon as the dollar unexpectedly rises, short positions come under pressure and have to be covered, reinforcing the upward movement.
Eamonn Sheridan, currency analyst at InvestingLive, warns of an increased risk of abrupt moves in key dollar currency pairs. While weak U.S. economic data could extend the dollar’s downward move, crowded short positioning also increases the potential for sharp countermoves.
At the time of going to press, the dollar index was trading at 97.13 points, up 0.25 percent. Bitcoin traded at $68,150, down around one percent.
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