Bitcoin has struggled to trade above $90,000 since falling below $95,000 on Feb. 24. The crypto asset has been subjected to severe price fluctuations over the past week, with Bitcoin’s (BTC) realized volatility, reaching its highest level since Q3 2024, according to Glassnode.
BTC annualized realized volatility. Source: Glassnode
While the market braced for further price swings ahead of the first-ever US crypto summit at the White House, analysts have also focused on the US dollar’s current plunge and its potential impact on Bitcoin.
Bitcoin, US Dollar Index correlation hints at new highs
James Coutts, chief crypto analyst at Real Vision, provided a detailed analysis examining the historical relevance of the declining US Dollar Index (DXY) and Bitcoin. With the DXY exhibiting its fourth-largest 3-day decline in history, exceeding -2% to -2.5%, Coutts said it could catalyze new Bitcoin highs.
Bitcoin and DXY percentile change. Source: X
Addressing historical data since 2013, the Coutts backtested the correlation between DXY dips and Bitcoin trends and analyzed the data DXY declines in the 2% and 2.5% range.
When DXY value drops 2.5% or more:
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Bitcoin has risen 100% of the time.
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The best case could produce a +1 standard deviation move of 65% or a $143,000 Bitcoin price
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The base case predicts an average return of 37% or $123,000 Bitcoin price
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The worst-case outcome entails a 14% gain or a $102,000 Bitcoin price
In the case of a DXY drop of 2% or more:
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Bitcoin has risen 17 out of 18 times, with a 94% win rate over 90 days
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Best-case, a +1 standard deviation move of 57.8% or $141,000
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Base-case, an average return of 31.6% or $118,000
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Worst case, a 14.6% decline or $76,500
With DXY dropping by 3% between March 3 and March 6, Coutts made a “bold call” and predicted new all-time highs (ATH) by May 2025.
DXY 1-week % change. Source: X
Similarly, Julien Bittel, macro research head at Global Macro Investor, echoed the possibility of an uptrend for Bitcoin based on DXY’s current decline. The analyst said,
“1) Financial conditions lead risk assets by a couple of months. 2) Right now, financial conditions are easing – and fast…”
Related: Bitcoin forgets Strategic Reserve ‘sell the news event’ with 4% bounce
Bitcoin eyes $140K after “Power of 3” breakout
Santiment, a data analytics platform, highlighted that more than 50,000 wallets had been added to the network over the past month. The data suggested that 37,390 new wallets held less than 0.1 BTC, 12,754 wallets held between 0.1-100 BTC, and six whale wallets held at least 100 BTC each.
Bitcoin’s network growth chart by Santiment. Source: X
This type of activity suggests that investors remain optimistic about the long-term prospects despite the price trending downward over the past month.
From a technical perspective, Jelle, a crypto investor, believed that Bitcoin’s “Power of Three” setup remained active at the moment. The analyst said,
“Bitcoin still looks eager to reclaim $91,200. Once it does – the power of three setups comes into play; with a target of $140,000.”
Bitcoin Power of 3 setup. Source: X
Related: Bitcoin has ‘more than 50% chance’ of new high by June: Cory Klippsten
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
