Yesterday (April 21, 2025), global financial markets displayed complex dynamics: the Dollar Index (DXY) fell by 0.53%, closing at 98.2790, the three major U.S. stock indices collectively declined, while Bitcoin rose against the trend by 4.06%, reaching a price of $87,000. This phenomenon has sparked heated discussions: is the weakening of the dollar index a key driving force behind Bitcoin's rise? This article will analyze the context of the dollar's decline, Bitcoin's performance, and the correlation mechanism between the two, as well as explore the impact of the U.S. stock market's decline on Bitcoin. At the same time, we note that traditional views hold that Bitcoin is highly positively correlated with the U.S. stock market, but the current market dynamics suggest that this relationship may not be absolute.
The Context of the Dollar Index Decline
The Dollar Index (DXY) is an indicator that measures the strength of the dollar against a basket of major currencies (such as the euro and yen). Yesterday, DXY fell by 0.53%, closing at 98.2790, marking a new low for the year. According to the latest data, the opening price of the dollar index was 98.7910, the previous trading day's closing price was 98.8060, the highest price was 98.7910, and the lowest price dropped to 97.9230. This decline continues the recent weakness of the dollar, which has cumulatively fallen over 7% since early April, partly due to market uncertainties caused by President Trump's tariff policies.
Dollar Index Chart
The Dollar Index has fallen from 110.170000 in early February 2025 to 103.190000 in March 2025, showing a clear downward trend. Yesterday (April 21), DXY further dropped to 98.2790, worsening this downward trajectory.
The dollar's decline may be related to the following factors:
Changes in Federal Reserve Policy Expectations: The Federal Reserve has recently lowered the benchmark interest rate in three meetings but indicated a slowdown in the pace of easing, reducing the likelihood of further rate cuts.
Impact of Tariff Policies: Trump's 145% tariff policy on China has sparked global trade tensions, leading foreign investors to sell dollar-denominated assets, putting pressure on the dollar.
Weakened Safe-Haven Appeal: Changes in global capital flows have diminished the dollar's safe-haven status, prompting funds to move toward other assets.
A weakening dollar typically benefits non-dollar assets (such as commodities and cryptocurrencies) because their relative prices rise. This laid a potential foundation for Bitcoin's rise yesterday.
Bitcoin's Slight Rise in Market Performance
Yesterday, Bitcoin's price rose by 4.06%, reaching $87,000, demonstrating a certain resilience. Although the increase is not dramatic, considering the general decline of U.S. stocks, Bitcoin's performance is particularly noteworthy. Market data shows that Bitcoin's trading volume increased yesterday, with net inflows of funds appearing on some exchanges, indicating a rebound in investor sentiment.
The direct driving factors behind Bitcoin's rise may include technical support (such as price breaking through short-term moving averages) and positive signals from on-chain data (such as accumulation by holders). However, the decline of the Dollar Index undoubtedly provides macro support. The weakening dollar reduces the appeal of holding dollar-denominated assets, prompting some investors to turn to high-risk, high-return alternative assets like Bitcoin. Additionally, concerns about inflation in the market may further enhance Bitcoin's appeal as 'digital gold.'
The Correlation Mechanism between the Dollar Index and Bitcoin
Historically, the Dollar Index and Bitcoin prices often exhibit a negative correlation. When the dollar strengthens, investors tend to hold dollar-denominated assets, potentially putting pressure on risk assets like Bitcoin; conversely, a weakening dollar may stimulate capital inflows into the crypto market. Yesterday's dynamics align with this pattern: DXY fell by 0.53%, while Bitcoin rose against the trend by 4.06%.
Figure 1 shows that since February 2025, the Dollar Index has continued to decline, falling from 110.170000 to 103.190000, and further dropping to 98.2790 yesterday. This trend sharply contrasts with the rise in Bitcoin prices (from approximately $75,000 to $87,000), highlighting a potential negative correlation between the two.
Analysts point out that the dollar's decline provides upward space for other assets, including cryptocurrencies. Specific mechanisms include:
Capital Flows: The weakening dollar reduces the returns on dollar-denominated assets, prompting global capital to flow toward high-yield assets like Bitcoin.
Safe-Haven Demand: The appeal of the dollar as a traditional safe-haven asset is declining, which may drive investors toward Bitcoin.
Macroeconomic Environment: Tariff policies may raise inflation expectations, while the Federal Reserve's slowing pace of interest rate cuts may put further pressure on the dollar, creating a favorable environment for Bitcoin.
However, the correlation between the dollar and Bitcoin is not absolute; short-term fluctuations may be influenced by technical factors or sudden events.
Divergence between U.S. Stock Decline and Bitcoin
Yesterday, the three major U.S. stock indices generally declined, with the S&P 500 index falling by about 1.8%, and the Nasdaq index experiencing an even larger decline led by technology stocks. The market generally attributes this to tariff uncertainties and concerns over economic slowdown, with companies like Apple (AAPL) under pressure due to escalating U.S.-China trade tensions.
Traditional views hold that Bitcoin is highly positively correlated with the U.S. stock market (especially technology stocks) because both are seen as risk assets that often move in sync with market sentiment. However, yesterday's rise in Bitcoin and decline in U.S. stocks formed a significant divergence, challenging this assumption. Possible reasons include:
Safe-Haven Attributes Emerge: The decline in U.S. stocks may prompt capital to flow into Bitcoin to hedge against risks, with Bitcoin's price rising in tandem with gold supporting this view.
Differential Impact of Tariffs: As a decentralized asset, Bitcoin is not directly affected by tariffs, which may attract safe-haven funds.
Divergence in Market Sentiment: The investor group in the crypto market is different from that in the U.S. stock market, and retail investors and 'whales' may make its reactions more independent.
Counterarguments and Balanced Analysis
Although the decline in the Dollar Index may support Bitcoin's rise, other factors cannot be overlooked. For example, technical analysis shows that Bitcoin's breakout from short-term resistance levels may attract buyers, and on-chain data also reflects a rebound in market confidence. The correlation between the dollar and Bitcoin has limitations; yesterday's rise may be merely a short-term fluctuation rather than a direct result of the dollar's decline.
Conclusion
Yesterday, the Dollar Index fell by 0.53% to 98.2790, U.S. stocks generally declined, while Bitcoin rose against the trend by 4.06% to $87,000, highlighting the potential driving effect of the dollar's weakness on Bitcoin. The declining trend of the Dollar Index (from 110.170000 to 98.2790) contrasts with the rise in Bitcoin prices, reinforcing their negative correlation. However, the divergence between Bitcoin and U.S. stocks suggests that their correlation is not fixed. In the current macroeconomic environment, Bitcoin may exhibit more independent investment characteristics.
Looking ahead, the trend of the Dollar Index will continue to impact the crypto market, but investors need to pay attention to comprehensive factors such as Federal Reserve policies, tariff developments, and on-chain data. It is advisable to remain rational and closely monitor market dynamics.