Record Bearish Dollar Bets Could Spark Unexpected Bitcoin Volatility

Investors are the most bearish on the U.S. dollar in more than a decade, according to Bank of America’s latest monthly survey, and that extreme positioning could trigger heightened bitcoin volatility in the weeks ahead. The survey shows net exposure to the U.S. dollar has fallen to its lowest level since early 2012, marking a record underweight stance. Concerns about a weakening U.S. labor market and the possibility of Federal Reserve interest rate cuts are driving the negative outlook on the greenback.

Historically, bitcoin has moved inversely to the U.S. Dollar Index (DXY). When the dollar weakens, BTC often rises because it becomes cheaper for global investors to buy. In addition, a softer dollar typically loosens global financial conditions, boosting risk assets like cryptocurrencies. By contrast, a stronger dollar tends to pressure bitcoin prices.

However, recent market trends suggest a shift in this long-standing correlation. Since early 2025, bitcoin has shown a surprising positive correlation with the dollar. Despite the DXY dropping more than 9% last year and another 1% this year, bitcoin has declined 6% in 2025 and is down 21% year-to-date. The 90-day correlation between BTC and the dollar index recently climbed to 0.60, its highest level in months, signaling that both assets have been moving in tandem.

If this positive correlation persists, further dollar weakness may not automatically boost bitcoin as in the past. Instead, a sudden dollar rebound—possibly triggered by a short squeeze—could push BTC higher. When traders hold crowded bearish positions, even a modest dollar rally can force rapid buying to cover shorts, amplifying volatility across currency markets and crypto markets alike.

With the dollar index near 97 and bitcoin trading around $68,000, investors should closely monitor shifts in Federal Reserve policy, labor market data, and positioning trends. Extreme bearish sentiment in the dollar may ultimately reshape short-term bitcoin price action in unexpected ways.