The US dollar rises, and Bitcoin rises too. Over the past 10 years, this simultaneous strength was as rare as the sun rising from the west. But this scenario actually played out in 2026, and it's not a one or two day fluke -- it's a sustained, abnormal market pattern.
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The traditional logic that "a strong dollar equals a weak Bitcoin" is breaking down, and the core reason is that Bitcoin's pricing power has changed hands.
First, look at the data: what's the difference between past and present?
From 2011 to 2025, Bitcoin and the US Dollar Index (DXY) showed a strong negative correlation. When DXY weakened (fell below 90), Bitcoin's major bull runs in 2013, 2017 and 2020 all arrived right on cue; when DXY strengthened, Bitcoin posted deep drops of over 60% in 2014, 2018 and 2022.
But 2026 data breaks this pattern. Bitcoin fell from its January high of $97,860 to around $63,000 in early August, a drop of roughly 25-31%; over the same period, the DXY held steadily above the 100 level. That means the dollar did not weaken, but Bitcoin fell on its own; when the dollar strengthens, Bitcoin is no longer suppressed as heavily as it used to be.
A more typical scenario came in late August: the US Treasury announced it would double its long-term Treasury bond repurchase scale, driving long-term yields lower. Bitcoin quickly rallied from the $60,000 range to above $75,000, gold rose at the same time, and the dollar weakened. In this round of correlation, Bitcoin followed the "de-monetization trade" playbook, moving in the same logic as gold, instead of reacting like a pure speculative asset as it did in the past.
Why the old negative correlation broke? Three core driving forces
Driving Force 1: Institutional capital inflow changed the pricing structure
Bitcoin spot ETFs sustained inflows are the most critical variable in 2026. On August 19 and 20, single-day net inflows to US Bitcoin spot ETFs hit roughly $517 million and $606 million respectively, maintaining a high level for multiple consecutive days. Institutional capital builds positions via ETFs, creating structural buying pressure independent of US dollar liquidity.
Analysts note that this shift moves Bitcoin's pricing from "retail traders' sensitive reaction to daily dollar moves" to "a macro asset underpinned by institutional channels like ETFs". Institutions do not place orders based on daily DXY ups and downs, but make long-term allocations as part of their broader asset allocation frameworks. This explains why Bitcoin no longer crashes unconditionally when the dollar strengthens.
Driving Force 2: US Treasury repurchase operations are actively pushing down real interest rates
In August 2026, the US Treasury announced it would raise the upper limit for 10-30 year Treasury bond repurchases from $20 billion to at least $40 billion. Treasury Secretary Bessant confirmed this adjustment, and noted the scale may expand further later.
The core logic of this set of operations is: the Treasury buys long-term Treasury bonds → pushes up bond prices → pushes down long-term yields → reduces real interest rates → weakens the attractiveness of the dollar → capital flows to scarce assets (gold, Bitcoin). The market reads this as a signal that "officials are willing to step in when the long end of the bond market faces pressure". While it is not quantitative easing in scale, its signal value is strong enough.
Driving Force 3: Bitcoin's narrative shifts from "risk asset" to "hard asset"
Gold and Bitcoin rising at the same time is the most intuitive market reaction after the US Treasury intervention. As of August 21, Bitcoin posted a weekly gain of roughly 20-23%, and gold's cumulative gain in August topped 13%, with the two assets strengthening in lockstep. Analysts point out that both gold and Bitcoin benefit when the "de-monetization trade" kicks off -- the market is pricing in expectations of currency devaluation and fiat credit revaluation, not economic growth outlooks.
Matt Cole, CEO of Strive, further judges that the US Dollar Index is in the early stage of a structural long-term downward trend. If this judgment holds, the next 5-7 years will be the most bullish macro environment in Bitcoin's history.
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But don't jump to conclusions yet: two opposing forces are still pulling the market
The current market state is not one-sided. One group of analysts argues that Bitcoin is still in the bear market capitulation phase, and the current price rebound is mostly a short-squeeze driven by short position covering, not a trend reversal.
The core evidence supporting this view is: while the directional premium in the derivatives market has turned positive (speculators are going long), the Coinbase premium index remains negative, which means real buying pressure in the US spot market has not picked up yet. Rallies driven by short covering are temporary. Only sustained ETF inflows and large-scale Bitcoin purchases from institutions like Strategy can extend the real bull market.
Verification method to confirm the trend: If you want to track whether this trend will continue, focus on two key metrics: ① Daily net inflow of US Bitcoin spot ETFs (counts only if it stays above hundreds of millions of dollars); ② 30-year US Treasury yield trend (a sustained drop is bullish for the rally).
Next step: Make a simple tracking table of the correlation between the three metrics: "DXY - US Treasury Yield - ETF Capital Flow". Next time you see Bitcoin spike sharply in a single day, first judge if it is driven by short covering or large-scale ETF buying. The former is likely a one-off move, while the latter is a real trend signal.
