Trump praises Bitcoin for saving the dollar, but data reveals a -0.7 negative correlation paradox

President Trump delivered a speech this week at the Miami U.S. Business Forum, claiming that cryptocurrencies have “greatly alleviated the pressure on the dollar,” and positioning the United States as a “Bitcoin superpower” and the “world cryptocurrency capital.” However, economic fundamentals reveal inherent contradictions. Historically, Bitcoin has shown a negative correlation with the U.S. Dollar Index (DXY), with a correlation coefficient of approximately -0.7. This means that a strengthening dollar typically suppresses Bitcoin prices, while a weakening dollar tends to boost Bitcoin prices.

The Inner Conflicts of Trump’s Crypto Policies and Dollar Hegemony

During his speech to thousands of attendees, Trump stated that his executive order ended what he called the federal government’s “war” on cryptocurrencies, contrasting his approach with the Biden administration’s aggressive enforcement stance, which he said has led industry insiders to face “prosecutions.” Beyond regulatory easing, Trump also views cryptocurrency adoption as an economic strategy, implying that digital assets can ease pressure on the dollar while positioning the U.S. as a global leader in cryptocurrencies and artificial intelligence. He claimed that the U.S. is “far ahead” of China in AI.

Support for Trump reflects growing Washington backing for stablecoins and strategic Bitcoin reserves. Senator Cynthia Lummis recently called strategic Bitcoin reserves the “only way” to effectively offset the U.S. $35 trillion debt burden, praising the Trump administration’s acceptance of this concept. She revealed that Treasury Secretary Scott Bessent and White House staff are exploring options beyond simply re-evaluating gold certificates, though details remain unclear.

A March government briefing indicates that the reserve will begin with over 130,000 Bitcoins obtained through criminal forfeiture, valued at approximately $34 billion, without new taxpayer expenditure. While this plan sounds promising, it overlooks a fundamental economic logic: Bitcoin’s value largely depends on the dollar’s weakness.

Similarly, Eric Trump recently told the New York Post that stablecoins issued by World Liberty Financial, such as the USD1 token, could bring “trillions of dollars from around the world” into the U.S. market, thereby “saving the dollar.” However, this logic also contains contradictions. If stablecoins truly strengthen the dollar’s position and encourage more people to hold dollar-denominated digital assets, increased demand for the dollar would push up the dollar index, thereby suppressing Bitcoin prices.

The Triple Contradictions of Trump’s Crypto Policies

Dollar as Reserve Currency vs. Bitcoin as a Hedge: Strengthening the dollar diminishes Bitcoin’s appeal as an alternative to the dollar.

Bitcoin Strategic Reserves vs. Dollar Strength: Holding Bitcoin reserves aims for appreciation, but a strong dollar policy suppresses Bitcoin prices.

Promotion of Stablecoins vs. Decentralization Ideals: Dollar-pegged stablecoins inherently reinforce the fiat currency system.

Historical Data Confirm: When the Dollar Strengthens, Bitcoin Weakens

(Source: MacroMicro)

Historically, Bitcoin has shown a negative correlation with the U.S. Dollar Index (DXY), with a coefficient of about -0.7. This indicates that a stronger dollar generally suppresses Bitcoin prices, while a weaker dollar tends to boost them. A correlation of -0.7 is considered a strong negative relationship in statistics, not just a short-term anomaly but a long-term structural relationship.

During the Federal Reserve’s 2022 tightening cycle, the dollar index soared to 114, while Bitcoin plummeted from $47,000 to below $17,000—classic evidence of this inverse relationship. As the Fed aggressively raised interest rates to combat inflation, the dollar’s appeal as a global reserve currency increased. Investors worldwide withdrew funds from risk assets, shifting into the dollar and U.S. Treasuries as safe havens. Bitcoin, as a high-risk, volatile asset, was sold off in this environment.

Conversely, during the 2020-21 easing period, a weaker dollar coincided with Bitcoin soaring to a then-record high of around $64,000. The Fed implemented unlimited quantitative easing, lowering interest rates to zero and purchasing assets extensively. The dollar depreciated due to increased supply, prompting investors to seek alternative stores of value, with Bitcoin benefiting.

Market observers note that Bitcoin behaves more like a high-beta risk asset rather than a safe haven; it rises in loose financial conditions and falls when liquidity is withdrawn. This characteristic conflicts with Trump’s policy expectations. If the Trump government truly succeeded in strengthening the dollar’s position as the dominant global reserve currency, the narrative of Bitcoin as a “dollar substitute” would weaken.

If cryptocurrencies genuinely alleviate dollar pressure by providing alternative transaction and store-of-value mechanisms, then a strengthening dollar would actually reduce Bitcoin’s attractiveness. Cryptocurrencies tend to attract funds when investors seek alternatives to weakening fiat currencies, not when traditional currencies are strengthening. Academic research using wavelet analysis confirms that Bitcoin and the dollar move asynchronously, although this relationship is still more sporadic than with traditional assets.

Recent Market Trends Confirm the Dollar-Bitcoin Paradox

Recent market movements exemplify this paradox. In late September, the U.S. released unexpectedly strong employment data, with initial unemployment claims dropping to 218,000 and Q2 GDP revised upward to 3.8%. The dollar index surged to a three-week high, while Bitcoin fell below $110,000.

On Thursday, better-than-expected services and employment data pushed the dollar to a five-month high again. Despite Bitcoin rebounding above $103,000, its recovery was limited. Current trading reflects the dominance of the dollar. Although Bitcoin rebounded Thursday, traders tend to “buy the dip and sell the rally,” quickly taking profits, as expectations of prolonged high interest rates and a strong dollar remain.

Market expectations for a Fed rate cut in December have decreased from 70% earlier this week to 60%, keeping yields firm and the dollar strong. This shift directly impacts Bitcoin’s trajectory. When markets believe the Fed will maintain higher rates, the dollar’s appeal increases, leading to capital outflows from risk assets like Bitcoin.

Notably, early this morning, the Turkish lira plunged to a record 42.1 lira per dollar (as of November 6), depreciating 97% since 2010, as ongoing inflation drives capital into the dollar. This case perfectly illustrates the dollar’s safe-haven status. When other fiat systems collapse, capital flows into the dollar rather than Bitcoin, demonstrating the dollar’s continued dominance in the global financial system.

Alok Jain once described this situation: “They keep printing more paper until people still believe it has value.” While this comment cynically criticizes the unlimited issuance of fiat, it also reveals a reality: as long as people trust the dollar, its status remains unshaken.

Political and Economic Considerations of Trump’s Crypto Strategy

Critics warn that conflicts of interest exist, including Rep. Maxine Waters and Sen. Elizabeth Warren, who argue that the interests of the president and his family could benefit from the crypto policies. They point out that the GENIUS Act, signed in July to establish a stablecoin framework, contains no provisions preventing the president or his family from profiting. This criticism highlights another dimension of Trump’s crypto policies: the intertwining of political and personal economic interests.

The Trump family’s extensive investments in the crypto space are well known. The USD1 stablecoin by World Liberty Financial, Meme coin, and various crypto-related ventures mean that the Trump family could directly benefit from policies favorable to the crypto industry. Such conflicts of interest are rare in modern U.S. political history.

However, from a purely economic policy perspective, Trump faces a genuine dilemma. The U.S. needs to maintain the dollar’s status as the global reserve currency, which underpins American financial hegemony. At the same time, Trump aims to make the U.S. a “Bitcoin superpower,” but these two goals are fundamentally at odds within economic logic.