Bitcoin Sheds Dollar Index Ties Ahead of Fed Rate Decision

Bitcoin's correlation to traditional assets has weakened ahead of the Federal Reserve's interest-rate decision on Wednesday. According to CoinMarketCap, Bitcoin's short-window correlation with the Dollar Index has collapsed to nearly zero, while its positive link to equities has also faded.

The collapse in correlations is attributed to the recent focus on the Clarity Act regulation, which failed a key Senate procedural vote on Tuesday. As a result, protective positions that worked recently are less reliable for now.

CoinMarketCap's head of research, Alice Liu, noted that Bitcoin's short-window correlation to the dollar index sits at +0.08, versus -0.54 over the past 30 days. The correlation to the S&P 500 has fallen to 0.43 from 0.75 yesterday, and to gold to 0.28 from 0.69 over 30 days.

The Fed is widely expected to raise interest rates by 25 basis points, which is largely priced in. However, a weaker dollar could be a tailwind for Bitcoin, and traders should also watch Treasury yields as sharp rise in yield volatility can tighten financial conditions.