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The Weakening Correlation Between the US Dollar and Bitcoin Could Potentially Benefit the Cryptocurrency

The US dollar has a significant impact on Bitcoin and other risk assets as it is the global reserve currency. In the past, Bitcoin has shown an inverse relationship with the dollar, gaining strength when the dollar weakens. However, this correlation has weakened recently, despite the dollar's decline. If the correlation returns, Bitcoin may have the opportunity to advance.

The dollar's status as the world's reserve currency also affects international trade, debt, and non-bank borrowing, with firms issuing debt in foreign currency via the dollar 70% of the time.

There is a possibility that the dollar may continue to decline due to lower inflation in the US compared to other countries. If this trend continues, the Fed may ease off rate hikes, which could potentially benefit Bitcoin if its inverse relationship with the dollar returns. However, there are high crypto-specific risks to consider. While a weakening dollar has historically been good for Bitcoin, the macro climate remains uncertain.

Bitcoin Bitcoin $97,985.70
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