Data on January 29 shows that over the past year, the US Dollar Index (DXY) declined by approximately 10%. However, Bitcoin did not rally as typically expected when the dollar weakens; instead, its price fell around 13% during the same period. This anomaly has attracted widespread market attention.
Short-Term Flows and Market Sentiment Drive Performance
J.P. Morgan Private Bank strategists note that the recent dollar weakness is largely driven by short-term capital flows and market sentiment rather than shifts in economic growth or monetary policy expectations.
At the same time, dollar interest rate differentials have remained favorable since the beginning of the year, preventing Bitcoin from acting as a typical dollar hedge.
Bitcoin Remains a Risk Asset
Analysts emphasize that because the market does not interpret the current dollar decline as a long-term macro trend, Bitcoin continues to be viewed as a liquidity-sensitive risk asset rather than a stable store of value.
In contrast, gold and emerging market assets have benefited more directly from the weaker dollar.
On-Chain Behavior Monitoring Provides Quantitative Insights
In this market environment, on-chain transaction analysis and behavioral monitoring have become increasingly valuable. Trustformer KYT can track addresses, transaction patterns, and fund flows to provide quantitative insights, helping investors and institutions assess risk appetite for Bitcoin and other digital assets.
By combining real-time on-chain data, financial institutions and professional analysts can better evaluate market liquidity changes, identify potential risks, and optimize investment decisions.
Integrating Market Understanding with Risk Management
Overall, Bitcoin’s atypical performance amid dollar weakness highlights its high dependency on liquidity and market sentiment. Using on-chain behavior monitoring tools like Trustformer KYT enhances market understanding, supports robust risk management strategies, and helps participants make rational decisions in volatile environments.