The US dollar is weakening, but Bitcoin remains "stagnant." What is the reason behind this?

The US dollar has weakened, but it has not ignited Bitcoin’s rally as it usually does. This “abnormal trend” has attracted market attention. J.P. Morgan Private Bank believes that the key is not Bitcoin itself, but rather the “nature” of this dollar decline, which is significantly different from previous ones. The US Dollar Index (DXY), which measures the dollar’s performance against major currencies, has declined about 10% over the past year; however, Bitcoin, traditionally seen as a “beneficiary of a weak dollar,” has actually fallen 13% during the same period.

Yuxuan Tang, Head of Asia Macro Strategy at J.P. Morgan Private Bank, pointed out that the recent dollar depreciation is driven by short-term capital flows and market sentiment, rather than changes in market expectations regarding the US economic outlook or monetary policy. He mentioned, “In fact, since the beginning of the year, the interest rate differentials have continued to develop in favor of the dollar. The current dollar sell-off we see is similar to April last year, mainly driven by capital flows and market sentiment.” Against this backdrop, J.P. Morgan believes that the dollar’s weakness may ultimately be a “phase phenomenon.” As the US economy gradually regains momentum this year, the dollar could stabilize again. It is precisely for this reason that Bitcoin has not exhibited the typical characteristics of a “dollar hedge asset” this time. In contrast, gold has continued to strengthen during the dollar’s decline, while Bitcoin prices have remained volatile within a range. This indicates that the cryptocurrency market does not believe that the dollar’s decline will lead to a long-term overall economic shift. From market performance, Bitcoin currently appears to be more like a risk asset that is highly sensitive to liquidity rather than a store of value. Until there is a clear shift in monetary policy expectations, a mere weakening of the dollar is not enough to attract significant new capital inflows into the cryptocurrency market.