Investor sentiment toward the U.S. dollar has soured to its weakest level in more than a decade, according to Bank of America’s February fund manager survey — a positioning extreme that could inject volatility into bitcoin, though the outcome may not follow the usual script.
The survey shows net exposure to the dollar has fallen to its most underweight reading since at least early 2012. Respondents attributed the shift largely to concerns about a cooling U.S. labor market, which could pave the way for Federal Reserve rate cuts.
For much of bitcoin’s history, the cryptocurrency has moved inversely to the U.S. Dollar Index (DXY). A weaker dollar typically eases global financial conditions and makes dollar-priced assets like BTC more attractive to international buyers. Conversely, a stronger greenback tends to pressure risk assets. By that logic, record bearish positioning in the dollar would normally be seen as a bullish backdrop for bitcoin.
However, recent price behavior complicates that narrative.
Since early 2025, bitcoin has exhibited a positive correlation with the dollar. The DXY dropped more than 9% last year and has edged lower again this year, yet bitcoin has also fallen — down 6% in 2025 and roughly 21% year-to-date. Data from TradingView show the 90-day correlation between BTC and the dollar index recently climbed to 0.60, its highest level since April 2025.
If that positive relationship continues, additional dollar weakness could coincide with further declines in bitcoin, marking a break from historical norms. On the other hand, a sharp rebound in the dollar — particularly if driven by a short squeeze — could pull BTC higher as well.
With bearish positioning in the dollar so crowded, even modestly stronger U.S. economic data could force traders to unwind short bets quickly. Such a rush to cover positions could trigger a swift dollar rally and ripple through broader markets, amplifying volatility.
“Record short positioning raises the risk of volatility in major USD pairs; downside may extend on weak U.S. data, but crowded trade dynamics increase potential for sharp short-covering rallies,” said Eamonn Sheridan, chief Asia-Pacific currency analyst at InvestingLive.
At last check, the dollar index was up 0.25% at 97.13, while bitcoin traded near $68,150, down about 1% on the day, according to data from CoinDesk
