The correlation of Bitcoin with the U.S. dollar might not be completely true after all as the situation seems to have reversed over the past three months.

Bitcoin and the USD Might Not be Correlated

There seems to be a general assumption of Bitcoin that the cryptocurrency turns into a bearish mode with the growing strength of the U .S. dollar against global major currencies as measured by the DXY index.

However, that seems to be not completely valid anymore as the correlation seems to have reversed over the past three months when one tracks the 20-day or 60-day correlation.

So I guess we’re not all obsessed with $DXY anymore? Because it’s looking super bullish & had provided an almost perfect inverse correlation for over a year. Either way we’re about to find out if $BTC has matured to the point of being uncorrelated. 🇺🇸🏦🖨️ #Banks #Brrrr #Bitcoin pic.twitter.com/gequzmr6p2

— Alex Saunders 🇦🇺👨‍🔬 (@AlexSaundersAU) February 2, 2021

The general assumption seems to have been validated till the month of March as both DXY and BTC have generally followed a similar trend.

Despite analysts having checked upon the correlation pattern based on  Bitcoin’s 1-day price movement, a macro perspective gives a clearer understanding of the potential impacts of the DXY index on the price of BTC.

For instance, both the dollar index and BTC’s price weakened during May, after a relatively flat period in late April.

U.S. Fed Projects Inflation to rising 3% by Year-End

Investors have been closely watching the two-day meeting of the U.S. Federal Open Market Committee that just took place last week, hoping the central bank’s interest rate policy would remain near zero in the long term.

During the meeting, the U.S. Federal Reserve announced two rate hikes for 2023, much earlier than many expected, triggering both the Dow Jones Industrial Average and the S&P 500 to immediately decline by 0.77% and 0.54% respectively, along with Bitcoin price.

Along with the interest rates, the Fed also projected inflation to rise to 3% by the end of the year instead of the estimated 2.2% predicted back in March.

News of rising inflation typically provides a bullish outlook for Bitcoin. However, with the recent data on the inverse correlation between BTC and the USD being not completely true, one can only hope for what takes to fruition in the end.