Bitcoin Rises Alongside Stocks and Gold, but Stronger Dollar May Limit Further Gains

Bitcoin has been moving closely with US stocks, gold and the dollar, but the greenback’s recent strength could act as a headwind to further price gains, according to a CryptoQuant analysis.

On October 11, CryptoQuant contributor Crazzyblockk wrote that Bitcoin is currently moving in strong lockstep with major financial markets. Whether the dollar extends its gains could help determine Bitcoin’s next price move, the analysis said.

CryptoQuant data showed that as of October 8, Bitcoin’s return correlation with the Nasdaq was 0.42 over the past 90 trading days, while its correlation with gold was 0.51. By contrast, it showed an inverse correlation of -0.36 with the US Dollar Index, or DXY. A correlation coefficient closer to 1 means assets tend to move in the same direction, while one closer to -1 indicates they tend to move in opposite directions.

It is unusual for Bitcoin to show such strong correlations with all three assets at the same time. Since 2014, those conditions have been met on only 11% of trading days over roughly the past 12 years. Similar stretches appeared twice before, from August 2020 to January 2021 and from September 2022 to June 2023. A comparable pattern has continued since June 12 this year. In particular, Bitcoin’s current correlation with gold is higher than 98.9% of historical 90-day readings.

The main difference this time is that the dollar is strengthening. In the previous two periods, the dollar fell 2.9% and 4.6%, respectively. Since June 12 this year, however, it has risen 2.4%. The move comes after the Federal Reserve raised interest rates last month and as benchmark 10-year Treasury yields approached their highest level in 24 years. Even so, Bitcoin has gained 29% over the same period. CryptoQuant said that rise is difficult to explain by moves in major financial markets alone and may reflect demand specific to Bitcoin itself.

With Bitcoin now showing strong ties to major assets, further dollar strength could weigh on the token, Crazzyblockk wrote. A turn lower in the dollar, by contrast, could support Bitcoin. Still, the three assets explain only about one-third of Bitcoin’s daily price moves, making it difficult to gauge Bitcoin’s direction from the dollar alone if those correlations weaken.