The key takeaways
BitcoinBTCThe US Dollar Index DXY, which measures the strength of the US dollar against major foreign currencies, has traditionally maintained an opposite relationship.
The correlation between the DXY and Bitcoin fluctuates over time. On Friday, Bitcoin fell below $114,000 while DXY rose to its highest point in nearly two months.
As the US Dollar reverses direction and begins to show signs of weakness, traders are watching Bitcoin for a re-claimation of the $120,000 level.
DXY was down to 98.5 last Wednesday. It failed to recover the 100-level on Friday. The Federal Reserve’s interest rate cut bets increased after a weaker than expected US jobs report in July. This weakened the dollar’s yield advantage. according Bloomberg.
Reuters noted As the US implemented new import tariffs against dozens of trading partners, this could raise prices at home and increase pressure on the policy.
Bitcoin can rise in value if the USD weakens, but fears of recession will cap gains.
You can get a softer dollar by buying a softer US currency supportive for Bitcoin’s price. However, the reverse may happen if you anticipate a recession or are risk-averse.
Bitcoin, for example, failed repeatedly to stay above $67,000, and finally dropped to just $53,000 in early September.
The ICE BofA high yield option-adjusted spread is one way that analysts can measure market sentiment. It’s a measure for the additional compensation investors want over rates of risk-free interest when they hold lower-rated corporate debt.
Spreads are a combination of credit and debit. liquidity risksIt is widely used as a proxy to measure risk appetite. An increased reading signifies greater caution on the market, while a reduced reading implies that investors are willing to accept more risk.
In August and September of 2024 the spread increased briefly, coincident with falling Bitcoin and a weaker US Dollar. In recent years, the spread has dropped dramatically to just 2.85 in late July 2025 from a peak of 4.60 reached back in April. Bitcoin also rose from a low of $74,500 on April 7. This shows how credit sentiment has improved and can be used to support risky assets.
Related: Bitcoin may still have steam for $250K this year: Fundstrat’s Tom Lee
US corporate bonds total assets of $11.4 trillion. according SIFMA Research has a significant impact on the economy.
Spreads that are higher mean companies will pay more when they refinance existing debt, or issue new bonds. A higher capital cost can lead to lower expectations of earnings, which could trigger a negative loop on investor sentiment.
BTC bulls are likely to be stopped for now by rising borrowing costs
In the event that the ICE BofA Option Adjusted High Yield Spread rose significantly, investors might move their money into US Treasurys with short maturities or to other countries where they can earn higher rates. This could lead to a weakening of the US Dollar.
The spread is currently near 3. It sits very close to the 200-day moving mean, which suggests neither a pessimistic nor an optimistic market outlook.
It is premature for now to assume that the recent DXY decline will lead Bitcoin back up to $120,000 anytime soon. Uncertainty about US labor market conditions Short-term forecasts continue to be impacted by the global trade tensions and, in particular, the tech sector’s dependence on AI data processors imported from other countries.
This is intended as general information and not to be taken and should not be construed as investment or legal advice. This article is solely for informational purposes. It does not represent or reflect Cointelegraph’s views.
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Source: cointelegraph.com
