Dollar Strength Weighs on Bitcoin but Correlation is Loosening

A stronger U.S. dollar typically has a negative impact on dollar-denominated assets like Bitcoin and gold, increasing repayment costs for borrowers with dollar-denominated debt.

However, recent data suggests that this correlation may be weakening. Since September 9, the U.S. Dollar Index has risen approximately 2.6%, reaching a two-month high of 101.69 on Tuesday. Despite this, Bitcoin's price has retreated from its peak near $87,500 on September 21 to the $83,000-$84,000 range.

A study by TradingView shows that over the past 90 trading days, the daily correlation coefficient between Bitcoin and the U.S. Dollar Index was -0.41, the lowest since February 2023, indicating a tendency for inverse movement. However, the corresponding coefficient of determination is only 0.17, meaning the dollar index explains roughly 17% of Bitcoin's daily return volatility.