Value of Bitcoin again correlated to the dollar

The trend over time of the value of Bitcoin is usually correlated with that of the US dollar. 

For precision, in the medium/long term, the variations in the price of Bitcoin are inversely correlated to those of the Dollar Index, the index that measures the strength of the US dollar compared to a basket of other important currencies globally. 

The decorrelation of Bitcoin from the value of the dollar

Sometimes, however, in the short term, this inverse correlation breaks. 

It is what happened after Donald Trump’s victory in the presidential elections on November 5 in the USA. 

In fact, that day the Dollar Index was well below 104 points, and in just over two weeks it rose to over 107 points, marking the highest annual record of 2024.

Trump’s victory, however, also gave wings to Bitcoin.

The value of a Bitcoin before the elections was less than $70,000, while in just over two weeks it has risen well above $99,000.

In other words, in the same period in which the Dollar Index was rising, Bitcoin was also rising, both driven by Trump’s victory. 

The return to normality

This dynamic continued until November 22. 

In the four following days, the Dollar Index fell, returning abundantly below 107 points, and the value of Bitcoin also fell, momentarily returning below $92,000. 

So until November 26, the two trends seemed apparently correlated. 

The return to normality, that is the inverse correlation between the trend of the Dollar Index and that of the BTC price, arrived last Wednesday, November 27. 

In fact, on that date, the Dollar Index continued to fall, so much so that by Friday it had also dropped below 106 points, while the price of Bitcoin started to rise again. 

However, the decline of the dollar was small and brief, so it is not surprising that the rise of Bitcoin was also small and brief. 

Furthermore, today the Dollar Index is showing a small rebound, as it has returned to about 106.3 points, and the price of Bitcoin has fallen from yesterday’s $97,000 to about $96,000.

So the phase of inverse decorrelation has ended, and it has returned to a phase of inverse correlation, as per the manual. 

The evolution of the value of Bitcoin and dollar in the coming days

Regarding the possible evolution of these dynamics in the coming days, it is important to make a significant distinction. 

In fact, in the short term, it seems possible that the Dollar Index may remain high, or even increase a bit more after having fallen last week. 

However, it also seems likely that the value of Bitcoin could rise. 

In other words, it would not be surprising if the inverse correlation jumped again, in the short term, until after the middle of the month. 

For example, in 2016, when Donald Trump won for the first time, the Dollar Index rose until November 23, then slightly fell until December 5. However, it then rose again from December 8 to December 20, before stopping, and started a decline in January that lasted 12 months. 

On the other hand, it is not at all impossible that from now until December 20, the price of Bitcoin will rise, perhaps even beyond that mythical $100,000 so eagerly awaited by the bull and bear community of bitcoiner. 

The evolution in the medium/long term

However, if the Dollar Index were to actually start to decline between the end of 2024 and the beginning of 2025, the inverse correlation with the trend of Bitcoin’s value could be reestablished. 

In 2016/2017, for example, the 12 months of decline in the Dollar Index corresponded almost exactly to the second major bullrun of the BTC price, which went from less than $1,000 to almost $20,000 in less than 12 months. 

It should also be added that both after Trump’s first election in 2016 and after Joe Biden’s in 2020, the Dollar Index ended up falling around 90 points, after being above 103 points in both cases the previous year. 

In this 2024 it has pushed beyond 107 points, and if it were to drop for practically twelve consecutive months down to the usual 90 points, it could help Bitcoin rise quite a bit. 

The record

To all this must be added that in November 2024 the value of Bitcoin recorded the all-time high regarding the monthly price increase in absolute terms (+$26,000), even if it is not the largest monthly increase ever in percentage terms. 

Furthermore, seven months after the halving, it is marking a gain of 129% since the beginning of the year. 

Obviously, one must not forget that in November 2024 it also recorded its all-time high value at around $99,600.

Although all this might lead one to believe that, at this point, a retracement should be possible, the above-mentioned dynamic related to the Dollar Index suggests that the retracement might not occur, and its run could continue well beyond $100,000.