In today's wave of digital economy, the rise of Bitcoin is undoubtedly a striking phenomenon. As the world's first decentralized digital currency, Bitcoin has not only changed the landscape of traditional finance, but also triggered people's deep thinking about the nature of money. At the same time, the status of the US dollar as the world's most important legal currency is constantly being challenged. Researchers point out that there is a strange connection between Bitcoin's dominance and the US dollar, which shows different faces in different economic environments and deserves our in-depth exploration.

First, the relationship between Bitcoin and the US dollar can be analyzed from the perspective of market demand. In recent years, against the backdrop of increasing global economic uncertainty, investors' demand for Bitcoin has risen significantly. Especially in the context of rising inflation, many people regard Bitcoin as a kind of "digital gold" to hedge against the risk of currency depreciation. For example, after the outbreak of the new crown epidemic in 2020, countries around the world have adopted large-scale monetary stimulus policies, and the supply of the US dollar has increased sharply, resulting in its value being weakened. In this case, more and more investors turned to Bitcoin, driving its price soaring, even reaching an all-time high in 2021.

However, this phenomenon is not one-way. Bitcoin's rise has also in turn affected the status of the US dollar. As the value of Bitcoin continues to rise, many investors have begun to waver in their confidence in the US dollar, and even the saying "Bitcoin replaces the US dollar" has emerged. In this case, the status of the US dollar seems to be under certain threat. Despite this, the US dollar is still the most circulated currency in the world, and many countries still use it as the main choice for foreign exchange reserves. This wonderful interactive relationship makes people wonder whether Bitcoin can really replace the US dollar in the future and become the new hegemon of global currency.

Further, the connection between Bitcoin and the US dollar is also reflected in the liquidity of exchanges. The increasingly active Bitcoin trading market, and the continuous increase in trading volume of major exchanges have attracted a large number of investors to participate. This phenomenon not only reflects the attractiveness of Bitcoin itself, but is also closely related to the liquidity of the US dollar. Many Bitcoin exchanges use the US dollar as the main trading currency, which means that the price of Bitcoin is largely affected by the US dollar. For example, if the US dollar depreciates, investors may be more inclined to buy Bitcoin with US dollars, thereby driving up the price of Bitcoin. On the contrary, if the US dollar appreciates, it may lead to a decline in the purchasing power of Bitcoin, thereby suppressing its price.

In addition, changes at the policy level are also an important factor affecting the relationship between Bitcoin and the US dollar. In recent years, governments have increasingly tightened their regulatory policies on digital currencies, especially in the United States. The U.S. government's regulatory policy on cryptocurrencies has a direct impact on Bitcoin's market performance. For example, in 2021, the U.S. Treasury proposed to strengthen supervision of cryptocurrency transactions, which led to sharp fluctuations in Bitcoin prices. This policy change not only affects investor confidence, but also reflects the complex interactive relationship between Bitcoin and the U.S. dollar.

In this process, Bitcoin's decentralized nature has freed it from the constraints of the traditional financial system to a certain extent. Unlike the U.S. dollar, Bitcoin is not controlled by the central bank and its supply is fixed. This feature gives Bitcoin certain advantages in dealing with inflation. However, it is precisely because of this decentralized nature that Bitcoin's price volatility is relatively large, and the risks faced by investors are also increasing. Therefore, many people are still cautious about the future of Bitcoin and believe that it cannot completely replace the U.S. dollar in the short term.

On the other hand, it is worth noting that although Bitcoin has achieved certain success in the market, its function as a currency is still questioned. Bitcoin's transaction speed is relatively slow and its transaction fees are also high, which makes it less convenient in daily payments. In addition, Bitcoin's price volatility is large, which may reduce its reliability as a means of storing value. Therefore, although Bitcoin shows a competitive relationship with the U.S. dollar in some aspects, in actual applications, the U.S. dollar is still a more stable and reliable choice.

In the long run, the relationship between Bitcoin and the US dollar may change with the development of technology and changes in the market. As blockchain technology continues to mature, more and more companies and institutions are beginning to explore the application scenarios of digital currency, which brings new opportunities for the future development of Bitcoin. At the same time, changes in the global economic situation may also prompt more people to pay attention to the potential of Bitcoin, which in turn affects its relationship with the US dollar.

In this context, investors need to maintain keen market insight and pay attention to the dynamic changes between Bitcoin and the US dollar. By analyzing market trends and policy trends, investors can better grasp opportunities and formulate reasonable investment strategies. In addition, as digital currencies continue to develop, investors should also pay attention to the performance of other cryptocurrencies in order to achieve better returns in a diversified portfolio.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

Bitcoin just surged above $11,000 following the recent Square news, and DeFi tokens everywhere have rallied sharply. Just like Bitcoin, altcoins have outperformed the top crypto assets, prompting another intraday drop in dominance.

Interestingly, a deeper examination of the DXY (Dollar Currency Index) relationship with altcoins revealed a bizarre correlation between Bitcoin dominance and the dollar itself. We’re looking at why this is the case and what this means for the larger crypto space in the coming months.

01 Bitcoin up as the dollar index falls?

After a year-long DeFi uptrend, Ethereum and ERC20 tokens have both significantly outperformed Bitcoin, causing BTC’s dominance to decline for the first time in years.

A few weeks ago, this trend began to reverse, with DeFi tokens falling nearly 60% across the board. One top asset manager who predicted Bitcoin would be beaten by Ethereum and its brethren now says this is temporary. However, after Bitcoin briefly broke through $11,000 today, altcoins turned more than twice as bullish.
Cryptocurrencies are extremely volatile due to their scarce supply, low liquidity, and valuations driven primarily by speculation. When dollars flow into altcoins, they tend to move (rise) much faster than Bitcoin because their market caps are not large enough.
A weak dollar may be the reason for the sudden surge in cryptocurrencies, and more stimulus measures put the dollar at risk of further declines, resulting in a surge in hard assets like cryptocurrencies.
However, strangely, this recent trend also shows a strange correlation between BTC dominance and the dollar itself.

02 Correlation between DXY index and BTC

According to the weekly Bitcoin trend chart on the TradingView website, the fluctuations in Bitcoin's weight relative to altcoins can be used to show when the "altcoin season" or altcoin crash is coming.
The chart also shows that altcoins rose sharply from late 2017 to early 2018 (BTC.D fell), and compared to the last altcoin season, the fractal of the DXY dollar currency index shows that BTC dominance and the dollar itself are correlated.

When the DXY line chart is juxtaposed with Bitcoin's dominance, a very similar trend occurs, which has continued until recently. After years of tracking data, the DXY itself has extremely high volatility and deviations compared to the dominance.
Based on what the correlation suggests, Altcoins perform well during periods of USD weakness, even better than Bitcoin. If this is true, then we will see more stimulus and a very strong altcoin season may be just around the corner.

In short, the wonderful connection between Bitcoin and the US dollar not only reflects the competitive relationship between digital currencies and traditional currencies, but also reveals the complexity of the modern financial system. In this era of uncertainty, investors need to continue to learn and adapt in order to remain invincible in the ever-changing market. In the future, whether Bitcoin can replace the US dollar globally and become the new currency hegemon is still a topic worthy of in-depth discussion. Regardless of the outcome, this monetary revolution will profoundly affect our understanding and use of currency, which is worthy of everyone's deep thought and attention.