Dollar bearish bets at a 10-year high… “Bitcoin volatility could rise”

Uk Jin

Summary

Bank of America (BofA)’s February survey results reported that dollar positioning is at its lowest level since early 2012.
CoinDesk explained that a weaker dollar typically boosts risk-asset appetite, which could create a favorable environment for Bitcoin.
CoinDesk projected that if a ‘short squeeze’ occurs in an overly crowded bearish dollar trade, the dollar could surge and Bitcoin could experience increased volatility.

A growing share of US investors are leaning toward the view that the dollar could weaken. Attention is focused on whether such market expectations could affect Bitcoin (BTC) volatility.

On the 17th (Korea time), cryptocurrency-focused outlet CoinDesk, citing Bank of America (BofA)’s February survey results, reported that dollar positioning is at its lowest level since early 2012.

Dollar positioning is an indicator of whether investors expect the dollar to strengthen or weaken. A low dollar positioning suggests that, rather than buying and holding dollars, many investors are reducing exposure or selling on expectations of a decline in the dollar’s value (weakness).

CoinDesk said that “Bitcoin has typically tended to move inversely to the U.S. Dollar Index (DXY), and a weaker dollar has been interpreted as a factor that boosts risk-asset appetite,” adding that it “could create a more favorable environment for Bitcoin.”

Recently, however, both Bitcoin and the dollar have at times declined together.

The outlet projected that “if an unexpected rebound occurs when bearish dollar bets are excessively crowded, a ‘short squeeze’ could emerge and send the dollar sharply higher,” adding that “Bitcoin could also experience increased volatility in that scenario.”