How Dollar Breakouts Have Nailed Bitcoin Peaks: Is Another Top in the Works?

A historical pattern linking U.S. dollar breakouts to Bitcoin market tops has pitted cyclical believers against institutional accumulators, leaving investors divided over Bitcoin’s short- to medium-term future.

As a result, investors are torn over what Bitcoin’s short to medium-term future holds.

On the one hand, Bitcoin OGs and whales, who believe in the crypto market’s four-year cycle, have resorted to selling their holdings and shorting.

Institutions, on the other hand, continue to accumulate Bitcoin at an unprecedented rate via exchange-traded funds or as part of their company’s treasury assets.

The second cohort believes in the “debasement trade” and expects erosion of trust in the U.S. dollar to fuel capital rotation into gold and Bitcoin, both of which are considered stores of value.

The dollar’s influence on Bitcoin

Bitcoin, like other risk assets, is sensitive to macroeconomic and policy changes.

A strong U.S. dollar often attracts investors to safe assets, such as bonds or T-bills, which in turn causes risky assets to decline. Macroeconomic policy changes, including central bank interest rate hikes, often trigger a sell-off in equities and crypto markets.

“For me, the most important chart is this one,” Jamie Coutts, chief crypto analyst at Realvision, tweeted on Wednesday, highlighting how the dollar index’s strength has consistently marked cycle peaks for Bitcoin.

In each instance, the DXY index often coiled up, forming a bottom. Such range-tightening behavior was followed by a breakout to the upside, showcasing the dollar’s strength and marking bull run tops for Bitcoin.

With a few exceptions, DXY has been stuck under 100, a key psychological level, since the second quarter of 2025.

Coutts doesn’t specifically point to a potential top formation for Bitcoin. The central question remains: “Will history repeat?”

Is Bitcoin forming a top?

Despite the historical precedent, “Bitcoin-dollar inverse correlation holds less than 30% of the time historically,” Derek Lim, head of research at crypto market-making firm Caladan, told Decrypt.

Lim pointed to the new dynamics introduced by institutional capital to support his outlook.

“The $150 to 170 billion in spot ETF assets didn’t exist in 2021,” the analyst said, suggesting the market is now dominated by “price-insensitive long-term holders.” This new foundation is evidenced by a “daily volatility that declined 57% from 4.2% pre-ETF to 1.8% post-ETF,” he added.

The analyst added that the macroeconomic backdrop also contrasts sharply with previous cycles.

Between 2021 and 2022, the U.S. Federal Reserve hiked rates nine consecutive times, totaling 525 basis points. Today, with the Fed having already begun an easing cycle, the pressure from the dollar may be less intense.

On prediction market Myriad, launched by Decrypt‘s parent company Dastan, users place a 65% chance on Bitcoin pumping to $120,000 rather than dumping to $100,000.

However, Lim does not discount a potential correction should the dollar bounce from current levels.

“If DXY rallies from 98.67 to 105-108, historical correlation suggests Bitcoin could correct 15% to 25%,” Lim said, placing it in the $85,000 to $95,000 range and opening the door for “aggressive” institutional buying.

Despite this risk, the analyst maintains a moderately bullish stance for the fourth quarter, forecasting a potential consolidation around $110,000, followed by an uptrend to $125,000 or $135,000 before 2025 ends.

The bullish view is supported by an easing macroeconomic outlook, including the Fed’s dovish stance, coupled with fundamental catalysts such as supply shocks from ETF-driven accumulation and hopes of a sustained weakness in the U.S. dollar.