๐ Does the Dollar Index (DXY) Lead Bitcoin? 1. Inverse Correlation โข When the U.S. dollar strengthens (DXY goes up), global liquidity tightens, and risk assets like Bitcoin often fall. โข When the dollar weakens (DXY goes down), capital tends to flow into non-dollar assets such as Bitcoin, gold, and commodities. 2. Leading Indicator? โข DXY is not a perfect leading indicator, but it often reacts quickly to interest rates and liquidity conditions. โข This can make it appear to move ahead of Bitcoin. โข Example: In 2022, U.S. rate hikes โ DXY surged first โ Bitcoin dropped heavily weeks later. โข But Bitcoin also has idiosyncratic drivers (ETF flows, miner selling, regulations, adoption news), so it doesnโt always follow DXY. 3. Practical Use โข Traders often watch for trend reversals in DXY as a