- According to Wells Fargo’s analysis, Bitcoin could rally soon as the U.S. dollar weakens.
- Bitcoin’s 10-week lagging correlation with DXY points to a potential bullish reversal.
- Wells Fargo links Bitcoin’s slump to dollar strength, forecasting a price recovery.
Wells Fargo anticipates improved performance for Bitcoin to move toward positive trends following its difficult start in 2025. The bank’s research examines Bitcoin’s relationship to the U.S. Dollar Index (DXY), which shows an inverse correlation. The relationship between Bitcoin value and a weakening dollar shows promise as a catalyst that can drive Bitcoin price growth.
The Impact of Dollar Strength on Bitcoin
In the latest report, Matt Sigel, the Head of Digital Assets Research at VanEck, quoted Wells Fargo, according to which BTC’s 23% pullback from its highs in early 2025 might be attributable to the surge in the value of the US dollar in late 2024. From Q4 2024, to January 2025 the DXY increased again by nearly 10% reaching a high of 110.176. However since that high the DXY has declined by more than 6% reaching 103.197.
Bitcoin has shown an anti-correlation with the DXY in the past, which means when the dollar is gaining strength, Bitcoin is likely to decline as investors switch to the dollar and other safe-haven assets. In times of economic uncertainty, when the dollar rises, the value of Bitcoin decreases. On the other hand, when the dollar weakens, Bitcoin recovers as it is considered a higher risk and a higher reward.
With the recent drop in the DXY, Wells Fargo believes Bitcoin may be on the verge of a price rally. Bitcoin could experience upward momentum as the dollar weakens, reversing the current downtrend.
Bitcoin Price Action: Consolidation and Key Levels
The analysis of Bitcoin’s price in March 2025 indicates that the price movement was very volatile. It briefly rose above $85k to reach $85,800, but being in a consolidation phase, it stabilized shortly after. The current Bitcoin price has found support around the $82,500 level, offering some resistance against the current decline in prices. The price then started to rise which indicated a potential for a bullish trend.
Bitcoin’s resistance remains firmly at the $85,000 level, where it encountered several failed attempts to break above. If Bitcoin can break through this level it could trigger a move toward the next resistance zones at $90,000 and beyond.
The market’s response to Bitcoin’s consolidation around this price range will be critical. A breakout above $86,000 could continue the upward trend while failing to break that level may see Bitcoin retest the $80,000 support range.
10-Week Lagging Correlation and Global Economic Uncertainty
Furthermore, Wells Fargo highlights that Bitcoin usually correlates with the DXY index with a 10-week lag. While the DXY index rises, it was found that the value of Bitcoin declines and when the DXY index declines, Bitcoin gains value. This pattern indicates that the drop in the DXY since January could indicate the potential rise in the price of Bitcoin. Such buffering has happened in the past, signaling that the existing circumstances might favor Bitcoin’s price rebound.
However, there is still much to contend with when predicting Bitcoin’s future. Volatility may arise from global and regional issues such as political uncertainties caused by President Donald Trump’s administration. Furthermore, decisions regarding interest rates and inflation by the Federal Reserve will continue to dictate the valuation of the US dollar and hence Bitcoins.
Wells Fargo’s analysis complements other market commentators who have noted that dips in the DXY have previously indicated bullish Bitcoin price action. However, due to the current state of the global markets, investors should be careful since economic fluctuations may reverse BTC’s positive development in the short term.