Bank of America’s latest investor survey shows US dollar bearishness has reached its most extreme level in more than a decade — and that positioning could be a catalyst for renewed volatility in bitcoin, though not necessarily in the straightforward way traders expect. What BofA found - In its February survey, BofA reports investor net exposure to the U.S. dollar is at a record underweight — the most negative positioning since at least early 2012. - The move is largely fuelled by worries that a weakening U.S. labor market could force the Federal Reserve to cut rates, putting downward pressure on the dollar. Why this normally matters for bitcoin Historically, bitcoin and the U.S. Dollar Index (DXY) have tended to move in opposite directions. Two reasons explain that relationship: - Bitcoin is dollar-denominated, so a softer dollar typically makes BTC cheaper for global buyers. - A stronger dollar tightens global financial conditions and usually squeezes risk assets like bitcoin; a weaker dollar often loosens conditions and supports them. By that logic, record bearish positioning on the dollar would normally look like a bullish tailwind for bitcoin. The twist: correlation has flipped But since early 2025, that historical inverse relationship has broken down. The dollar plunged more than 9% last year and another ~1% so far this year, yet bitcoin fell 6% in 2025 and is down about 21% year-to-date. Data from TradingView shows the 90-day correlation between BTC and DXY climbed to 0.60 on Monday — the highest level since April 2025 — meaning the two have been moving more in tandem recently. Why this matters for crypto traders Extreme bearish bets on the dollar create an additional market risk: a short squeeze. If the dollar suddenly bounces — perhaps on stronger US data or a surprise Fed signal — investors who are heavily short the dollar must buy back positions to stem losses. That rush to cover can push the dollar sharply higher and, given the recent positive BTC–DXY link, force bitcoin higher as well. Conversely, if the dollar declines as the bears expect, BTC may not necessarily benefit if the new positive correlation persists. “Record short positioning raises the risk of volatility in major USD pairs; downside may extend on weak US data, but crowded trade dynamics increase potential for sharp short-covering rallies,” said Eamonn Sheridan, Chief Asia-Pacific Currency Analyst at InvestingLive. Market snapshot At press time the DXY was up 0.25% at 97.13, while bitcoin traded around $68,150, down roughly 1%, according to CoinDesk. Bottom line BofA’s survey flags one of the most crowded bearish dollar trades in years — a setup that could amplify volatility across both FX and crypto markets. For bitcoin investors, the biggest takeaway is that outcomes are less binary: a weaker dollar could help BTC if historical dynamics reassert themselves, but a sudden dollar rebound driven by short-covering could lift bitcoin too, given the recent correlation shift. Watch USD positioning, incoming US data, and any changes in the BTC–DXY correlation for signs of which scenario is unfolding. Read more AI-generated news on: undefined/news

#BTC