A sharp decline in the US Dollar Index (DXY) has sparked bullish sentiment for Bitcoin, but Real Vision crypto analyst Jamie Coutts warns that two key metrics could pose short-term risks.
As of March 10, the DXY has dropped to a four-month low of 103.85, reflecting the dollar’s weakening against a basket of global currencies. Historically, a declining dollar strengthens risk-on assets like Bitcoin. However, Coutts cautions that rising Treasury Bond volatility and widening corporate bond spreads signal potential turbulence ahead.
Treasury Volatility and Liquidity Concerns
US Treasuries serve as critical global collateral. Increased volatility in this market forces collateral haircuts, restricting liquidity. The MOVE Index, which measures Treasury bond market volatility, is currently stable but climbing. “With the dollar’s rapid decline in March, one might expect volatility to compress. If it doesn’t, the dollar may reverse, which would be bearish,” Coutts explained in a March 9 post on X.
Bitcoin is like playing a game of Chicken with central banks.
— Jamie Coutts CMT (@Jamie1Coutts) March 10, 2025
While my framework is turning bullish as the dollar plunges, two metrics still raise alarms: Treasury Bond volatility (MOVE Index) and Corporate Bond spreads. In this thread, I'll explain how these factors interact… pic.twitter.com/gWaGlVyo2A
If volatility spikes further, liquidity constraints could prompt central bank intervention. While such intervention could ultimately benefit Bitcoin, the immediate effects might include market uncertainty and price fluctuations.
Corporate Bond Spreads Flash Warning Signs
Another key risk indicator is the widening of corporate bond spreads. Over the past three weeks, these spreads have been expanding, and historically, major reversals in this metric have coincided with Bitcoin price peaks. This suggests that Bitcoin may face short-term headwinds despite the broader bullish narrative driven by a weakening dollar.
BREAKING: US dollar has just broken down from a head and shoulders topping pattern
— Bravos Research (@bravosresearch) March 5, 2025
This could be a major tailwind for risk-on assets pic.twitter.com/Ghf7kdI9Iq
Long-Term Outlook: Bitcoin’s “Game of Chicken” with Central Banks
Despite these risks, Coutts maintains a cautiously bullish stance. He highlights several long-term tailwinds, including growing institutional Bitcoin adoption, a potential doubling of spot ETF positions, and Michael Saylor’s aggressive accumulation strategy, which could add 100,000 to 200,000 BTC to his firm’s reserves.
“Think of Bitcoin as a high-stakes game of chicken with the central planners. With their options dwindling—and assuming HODLers remain unleveraged—the odds are increasingly in Bitcoin’s favor,” Coutts stated.
Also Read: Dormant Darknet Wallet Awakens: $400M in Bitcoin Moves After Nine Years
While short-term risks persist, the overall trajectory suggests that Bitcoin remains well-positioned for growth as the dollar continues its downward trend.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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