Since last Wednesday, Bitcoin has maintained a narrow trading range, with volatility remaining below 3% for six consecutive days. This unusually low volatility has led the market to question whether a breakout could be affected by the weakening dollar, especially in the context of deteriorating financial conditions in the U.S.
While the movement of the dollar is closely watched, Bitcoin still requires many important factors to reach the $110,000 milestone.
There is a negative correlation between the strength of the dollar and Bitcoin's price movements. However, historical data shows that similar periods also exist. A typical example is from August 2024 to April 2025, when Bitcoin performed strongly while the dollar index rose from 100 to 110, before weakening as the dollar fell to 104. This suggests that relying solely on a weakening dollar to explain Bitcoin's potential upward momentum is untenable, as both assets have performed strongly at times recently.
The U.S. economy remains a dominant force, accounting for 26% of global output. However, according to data from Global Investment Research, 46% of the revenue of companies in the NASDAQ 100 index comes from international markets. A weaker dollar index typically benefits these companies, as their overseas earnings become more valuable when converted to dollars.
Will Bitcoin benefit from inflation and capital flows?
Many investors still view Bitcoin as a risk asset rather than a completely unrelated financial option. With the NASDAQ 100 index reaching an all-time high on June 30, investor confidence is strengthening, encouraging some to shift from fixed assets to riskier assets, including Bitcoin.
Another potential factor driving Bitcoin to break through $110,000 is the re-emergence of inflationary pressures. After inflation has exceeded the Federal Reserve's target for five consecutive months, the U.S. personal consumption expenditures price index remained below 2.3% from March to May.
Regardless of whether the correlation between Bitcoin and consumer prices holds, this cryptocurrency has long been touted as a hedge against inflation, especially during the bull market in 2021. Bitcoin is often compared to digital gold, but its 114% increase in 2024 indicates that a bull market could occur even in a low-inflation environment.
Although not directly related to Bitcoin, the potential inclusion of Strategy (MSTR) in the S&P 500 index could be a secondary driver of Bitcoin's rise. If included, some passive capital will begin to chase Bitcoin.
Ultimately, Bitcoin's ability to break through $110,000 may be driven by various factors: increased risk appetite after the stock market hits record highs, renewed inflation concerns, and the possibility of Strategy being included in the S&P 500 index—all of which could come together to create favorable momentum for BTC's price.
Today's fear index is 64, indicating a state of greed.
Goldman Sachs predicts that the Federal Reserve will initiate interest rate cuts in September, potentially cutting three times within the year. Most institutions are currently optimistic about rate cuts, and Bitcoin's price hovers around $107,000. After some liquidity was withdrawn around $108,000, BTC experienced a slight pullback, but the market did not crash significantly, indicating that new highs for Bitcoin have become inevitable, possibly occurring within the next week.
Additionally, the SEC is highly likely to approve XRP and LTC spot ETFs this year, which will definitely trigger a wave of altcoin surges.