The primary driver behind this pronounced bearish stance on the dollar appears to be growing concern over the U.S. labor market. Investors increasingly believe that potential weakness in employment data could pressure the Federal Reserve into cutting interest rates. Expectations of monetary easing have, in turn, fueled broader dollar pessimism.

Bitcoin and the Dollar: A Historically Inverse Relationship

Since its inception, Bitcoin has generally exhibited an inverse correlation with the U.S. Dollar Index (DXY). When the dollar weakens, Bitcoin has often strengthened; when the dollar appreciates, risk assets—including cryptocurrencies—tend to face headwinds.

There are two core explanations for this pattern. First, Bitcoin is priced in dollars, so a weaker dollar effectively makes the asset relatively more attractive. Second, a strong dollar typically tightens global financial conditions, weighing on higher-risk assets.

Viewed through this traditional lens, record bearish positioning against the dollar could be interpreted as a tailwind for Bitcoin.

A Changing Correlation Dynamic

However, recent market behavior complicates the narrative. Since the beginning of 2025, Bitcoin and the dollar have displayed an unusual positive correlation. While the DXY declined by more than 9% last year and is down roughly 1% this year, Bitcoin has not benefited. Instead, it has fallen 6% over 2025 overall, with losses reaching approximately 21% year-to-date.

The 90-day correlation coefficient has climbed to 0,60, marking its highest level since April 2025. This shift suggests that the conventional inverse relationship may no longer be reliable in the current macro environment.

If this positive correlation persists, further dollar weakness could have the opposite of its typical effect, potentially weighing on Bitcoin rather than supporting it.

Volatility Risks and the Short Squeeze Scenario

At the same time, extreme short positioning in the dollar raises the risk of a sharp reversal. A sudden rebound in the dollar could trigger a short squeeze, forcing investors to rapidly cover positions and driving the currency higher. In such a scenario, Bitcoin could move upward alongside the dollar, reflecting the current correlation structure.

With dollar sentiment stretched to historic extremes, volatility risks are elevated. Bitcoin’s trajectory will depend not only on the direction of the dollar, but also on how this evolving correlation dynamic unfolds.

This content is not investment advice.

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Zero Exposure Dominates in Crypto Investments

A significant portion of the investors surveyed reported holding no crypto assets in their portfolios. This indicates that, despite increasing institutional interest in recent years, traditional fund managers still exhibit considerable caution toward cryptocurrencies.

Among the small number of fund managers who do invest in crypto, the average allocation in their portfolios is only 3.2%. This figure demonstrates that, on a global scale, crypto assets still occupy a limited place in mainstream investment portfolios.

Reasons for Institutional Investors’ Hesitation

According to experts, there are several reasons why institutional fund managers show limited interest in cryptocurrencies:

• Regulatory uncertainties
• High volatility and perceived risk
• Search for safe havens in traditional markets
• Risk management constraints in investment policies

These factors are key elements that slow down large funds’ approach to crypto investments.

What It Means for the Crypto Market

The Bank of America survey shows that the crypto market has not yet gained broad acceptance among institutional investors. However, the growing demand for spot Bitcoin ETFs, accelerated regulatory developments in the U.S., and advancements in areas such as RWA (real-world assets) are seen as factors that could potentially change fund managers’ stance in the near future.

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Bringing Inflation Down Will Take Time

According to Moynihan, the Fed’s 2% inflation target is not easily achievable. By keeping interest rates unchanged and maintaining tight monetary policy, central bank officials expect markets to cool and price pressures to ease. However, Moynihan stated that this process may take longer than expected and investors should not expect a quick rate cut.

Call for Simpler and Clearer Regulation for Banks

Moynihan said that regulation of the banking sector in the US has become too complex, making it difficult for banks to operate in a stable manner.

“Give us a regulatory framework that makes sense and make it permanent. We can’t reassure our clients for the long term because of the ever-changing rules.”

BofA CEO stated that uncertainties have increased, especially regarding money laundering (AML), customer recognition (KYC) and mandatory reporting obligations, and that they could not even explain to customers why some accounts were closed.

“Debanking” Debates between Trump and Banks

BofA and JPMorgan will lobby the White House and Congress to counter political accusations against banks by former US President Donald Trump and some Republicans.

Trump has accused big banks of closing the accounts of conservative clients and denying services to industries such as arms manufacturers and fossil fuel companies. Republicans have called this “woke capitalism,” while banks say they are not closing accounts for political reasons and that the process is driven by regulatory rules. Moynihan emphasized that this issue is not political, but is entirely dependent on banking rules.

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