Key points:
Bitcoin (BTC) Historically maintained an inverse relationship with the US dollar index (DXY), which tracks the strength of the US dollar with a basket of major foreign currencies.
Although this correlation has changed over time, Bitcoin fell by $114,000 on Friday, coincided with the DXY climb reaching its highest level in more than two months.
Now, traders are focusing on Bitcoin to recover the $120,000 mark as the dollar reverses its direction and begins to show signs of weakness.
DXY fell to 98.5 after DXY failed to regain the 100 level last Friday. A U.S. jobs report that exceeded expectations prompted traders to increase the Federal Reserve’s bet to cut multiple interest rates, which undermined the dollar’s earnings advantage, according to Go to Bloomberg.
So is Reuters Famous Inflation concerns are due to the U.S. imposing new import tariffs on dozens of trading partners, a move that could raise domestic prices and further pressure on monetary policy.
Weak dollar can boost Bitcoin, but recession fears hats will increase
A gentle dollar can be Support Bitcoin pricethe opposite may occur if investors expect economic slowdown or avoid risk for any reason.
For example, between June and September 2024, DXY fell from 106 to 101, but Bitcoin repeatedly held more than $67,000, and eventually dropped to $53,000 in early September.
One way for analysts to gauge market sentiment is to track the adjusted spread of ICE BOFA high-yield options, which is the additional compensation required by investors for holding low-rated corporate bonds.
This time, credit is generally integrated. Liquidity riskmaking it a widely used agent for risk appetite. Higher reading signals are more cautious in the market, while lower readings indicate investors are more willing to take risks.
The spread briefly soared in August and September 2024, coincided with weaker US dollar and falling Bitcoin prices. Recently, by late July 2025, it reached 4.60 in April and dropped sharply to 2.85 by late July 2025. The decline matched Bitcoin’s rally to the $74,500 low on April 7, highlighting how improved credit sentiment supports risky assets.
Related: Bitcoin may still have $250,000 in steam this year: Tom Lee of Fundstrat
The U.S. corporate bond market totals $11.4 trillion in assets, according to The SIFMA study and its economic impact are enormous.
Higher spreads mean companies face greater costs when refinancing existing debts or issuing new bonds. Higher capital costs can reduce returns expectations and may trigger a negative feedback loop in investor sentiment and equity valuation.
Higher borrowing costs may stop BTC Bulls
If the adjusted spread of ICE BOFA high-yield options will rise sharply, traders may transfer funds to the short-term U.S. Treasury Department or seek higher yields abroad, both of which could weaken the dollar.
Currently, the spread is close to its 200-day moving average, which is neither an overly optimistic market position.
For now, it seems too early to see DXY’s recent decline as a clear signal that Bitcoin will soon regain $120,000. Uncertainty U.S. labor market conditions And the impact of global trade tensions, especially the technology industry’s reliance on imported AI data processing units, continues to weigh the short-term outlook.
This article is for general information purposes and is not intended to be considered legal or investment advice. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or represent Cointelegraph’s views and opinions.
