As the US presidential election approaches, Bitcoin’s historically inverse relationship with the dollar index (DXY) is coming under the spotlight.
Bitcoin’s Negative Correlation with the Dollar Index Under Pressure Ahead of the US Election
Market signals suggest that this long-standing dynamic could be changing, with investors looking to take a bullish position on Bitcoin (BTC) despite expectations of a stronger dollar.
Bitcoin Sees Bullish Sentiment Despite Dollar Strength
- Options data from the Chicago Mercantile Exchange (CME) shows that one-month 25-delta BTC risk reversals (a measure of the premium paid for call and put options) currently stand at 1.20, indicating a bullish trend for Bitcoin over the next four weeks.
- The buyer of a call option is typically bullish and expects the market to rise, while the buyer of a put option seeks to protect against downside risk.
Meanwhile, risk reversals for contracts expiring around the Nov. 8 election date on crypto options exchange Deribit also mirror call preference, according to Amberdata data.
In contrast, forex options on the euro-dollar (EUR/USD), a key DXY component, are trending lower, with a 30-day risk reversal of -0.39, suggesting continued dollar strength. Similar trends are evident in GBP/USD options.
BTC Defies DXY Trends, Reaches Multi-Month High
Bitcoin rose to nearly $68,000, its highest level since July 29, even as the dollar index remained steady above the $103.00 level and consolidated a 3% gain since late September, according to TradingView data.
This divergence suggests that Bitcoin is starting to decouple from the dollar index, a trend that could intensify as the US elections approach.
*This is not investment advice.