Bitcoin's Structural Weakness Amid Dollar Strength and Fed Uncertainty

The recent rebound in Bitcoin's price has sparked debate among investors: is this a genuine bullish reversal or a deceptive B-wave rally masking deeper structural vulnerabilities? As the U.S. dollar strengthens and the Federal Reserve grapples with policy divergence, Bitcoin's performance against traditional safe-haven assets like gold, coupled with technical and macroeconomic signals, suggests a precarious outlook for crypto bulls.

The BTC/Gold Ratio: A Harsh Reality Check

Bitcoin's relative value against gold has deteriorated sharply in 2025. The BTC-XAU ratio, which measures how many ounces of gold are required to purchase one Bitcoin, has fallen from 40 ounces in December 2024 to 31.2 ounces by late 2025. This decline reflects gold's outperformance, with the precious metal rising over 33% year-to-date compared to Bitcoin's modest gains. Gold's dominance underscores a critical shift: Bitcoin is no longer functioning as a reliable hedge against macroeconomic volatility. Instead, it has moved in lockstep with equities, a trend that weakens its appeal as "digital gold" according to analysis.

The BTC-XAU ratio has been consolidating within an ascending triangle pattern since 2017, with analysts anticipating a potential breakout by late Q4 2025 or early 2026. However, Bitcoin's recent 30% decline from its peak-amid a U.S. dollar surge-has eroded confidence in its ability to break above this pattern. A stronger dollar increases the cost of gold and Bitcoin for international investors, further pressing the BTC-XAU ratio.

Fed Policy Divergence and Macroeconomic Volatility

The Federal Reserve's Q4 2025 policy trajectory remains a wildcard. After delivering a 25-basis-point rate cut in September, the Fed faces mounting pressure to ease further as labor market conditions weaken. Job creation has slowed dramatically, with only 22,000 payrolls added in August compared to an average of 123,000 earlier in the year. Meanwhile, core CPI remains stubbornly above the 2% target at 3.1%, driven by shelter and food costs. This inflation-labor market duality has created a policy dilemma: cutting rates risks reigniting inflation, while maintaining tight policy could exacerbate economic fragility.

The Fed's divergence from the European Central Bank (ECB) and Bank of Japan (BoJ) adds complexity. While the ECB appears content to hold its 2% rate as a neutral midpoint, the BoJ continues its accommodative stance despite inflation rising above target. This divergence has fueled macroeconomic volatility, with Bitcoin's price action reflecting heightened sensitivity to geopolitical tensions and trade uncertainties. For instance, Bitcoin surged over 8% in Q3 2025 amid the Fed's rate cut and escalating Middle East conflicts, signaling a temporary shift toward its traditional safe-haven role. However, this resilience has been undermined by institutional adoption trends, as entities like JPMorgan and MicroStrategy increase Bitcoin holdings, creating a mixed narrative of demand and speculative pressure.

Technical Analysis: B-Wave Rally or Bear Market Setup?

Elliott Wave analysis suggests Bitcoin's recent rebound aligns with a corrective B-wave rally within a broader bearish structure. The asset appears to be completing a Wave (4) near $80K–$83K, with a potential Wave (5) rally toward $100.7K–$140.2K according to price prediction analysis. However, this scenario assumes a continuation of the larger downtrend, as the B-wave is typically a retracement within a larger correction.

Technical indicators reinforce this bearish bias. Bitcoin's monthly candlestick formation-a 23% decline from $130K to the mid-$80Ks-is described as one of the "ugliest candles in over a decade". The monthly RSI is rolling over sharply from overheated levels, signaling exhaustion in the upward move. Additionally, the weekly chart has formed a rising wedge since August 2024, with critical support at $102K and resistance at $131K. A breakdown below $102K would confirm a structural bear market, potentially ushering in a new crypto winter.

Volume and momentum data further weaken the case for a bullish reversal. The October 10 liquidation event wiped out $19 billion in open positions, leaving the market "almost completely deleveraged". While this could set the stage for a directional move, the lack of follow-through buying and RSI divergence suggest momentum is waning.

Strategic Implications for Investors

As the December Fed meeting approaches, investors must weigh the risks of a B-wave rally against the potential for a deeper correction. The Fed's internal divisions-between dovish officials like John Williams and hawkish figures like Susan Collins-highlight policy uncertainty. A delayed rate cut could prolong dollar strength and gold's dominance, further pressing Bitcoin. Conversely, an aggressive easing cycle might temporarily boost risk assets but could reignite inflation, complicating the macroeconomic outlook.

Historically, Fed rate cuts have had mixed effects on Bitcoin. While monetary easing often precedes equity market peaks, the 2024 cycle may avoid a recession-a scenario that could benefit Bitcoin if institutional adoption continues. However, yield curve inversions and inflation risks remain critical watchpoints. A resurgence in inflation or a policy pivot back to tightening could force Bitcoin into a prolonged bear phase.

Conclusion

Bitcoin's recent rebound, while encouraging, appears to be a deceptive B-wave rally rather than a genuine bullish reversal. The BTC/gold ratio, Fed policy divergence, and technical indicators all point to structural weaknesses that could undermine the asset's long-term prospects. Investors should remain cautious, prioritizing risk management and hedging strategies ahead of the December Fed meeting. In a world of macroeconomic volatility and central bank uncertainty, Bitcoin's role as a safe-haven asset remains unproven-and its price action suggests it may yet face a harsh reckoning.