BofA's investigation into dollar weakness reveals new opportunities and risks for Bitcoin

Recent signals in the market have caught attention. Major U.S. banking institutions are taking huge short positions against the dollar. What does this mean for Bitcoin? Looking at recent survey results from Bank of America (BofA), investor expectations for a weaker dollar are higher than ever.

Record-breaking dollar short positioning… What BofA’s survey reveals

According to BofA’s survey, investor positioning has fallen to its most bearish (negative) level since early 2012. Net exposure is at an all-time low, recorded as Underweight, driven by concerns over further deterioration in the U.S. labor market and the possibility of the Federal Reserve cutting interest rates.

Historically, a weak dollar environment has positively impacted risk assets like Bitcoin. As the dollar’s value declines, Bitcoin becomes relatively cheaper to buy, and a weak dollar also boosts global demand for risk assets. Based on this logic, the record-high dollar short positioning should be seen as a bullish signal for Bitcoin.

A reversal has occurred… Unusual positive correlation emerging after 2025

However, reality is more complex. Since early 2025, Bitcoin has been showing an abnormal positive correlation with the dollar index (DXY). According to TradingView data, the 90-day correlation coefficient has reached 0.60, the highest in over a year.

Specifically, despite the dollar index falling over 9% in the past year and dropping another 1% this year, Bitcoin (BTC) has declined 6% in 2025 and is down 21% from the start of the year. This is a completely different pattern from past inverse movements. Currently, Bitcoin is trading around $70,530 (as of March 24, 2026).

Double risk of dollar short squeeze… Volatility explosion possible

If this new correlation persists, further dollar declines could be negative for Bitcoin. Conversely, a bigger risk comes from a dollar short squeeze. When investors are heavily positioned in extreme dollar shorts, an unexpected rebound could trigger a massive short squeeze.

In such a scenario, large-scale liquidation of short positions aiming to limit losses would cause asset prices to surge. Amon Sheridan, senior currency analyst at InvestingLive Asia-Pacific, explained: “Record short positioning in major USD currency pairs increases volatility risk. While weak U.S. economic data could continue the bearish trend, overcrowded short trades also raise the possibility of a rapid short-covering rally.”

If this dollar bearish positioning reverses, Bitcoin volatility could also spike dramatically.

Next move depends on oil prices and geopolitical tensions

As of now (March 24, 2026), the dollar index has risen 0.25% to 97.13, and Bitcoin has recovered with a 1.40% increase. After President Trump announced the suspension of Iran energy infrastructure attacks, Bitcoin stayed above $70,000.

Major altcoins like Ethereum, Solana, and Dogecoin also gained about 5%, while broad stock market strength supported the rally, with the S&P 500 and Nasdaq up about 1.2% each.

Analysts believe Bitcoin’s future depends on oil prices and shipping stability through the Strait of Hormuz. In an optimistic scenario, Bitcoin could test the $74,000–$76,000 range, but in a worse case, it could fall into the mid-$60,000s. Overall, heightened volatility is expected amid the interplay of dollar weakness positioning and a new correlation with Bitcoin.