Bitcoin's Dollar-Driven Rally: A New Bull Market or a Passing Fad?

Bitcoin's recent surge to a new all-time high of $112,000 in July 2025 has sparked debates about whether this marks the start of a sustained bull market or a temporary rally fueled by dollar weakness. To answer this, we must analyze Bitcoin's performance through three lenses: its underperformance against gold and GBP, the role of the DXY's 200-day moving average (MA) breakdown, and the tension with on-chain metrics like negative Apparent Demand. The answer holds profound implications for investors weighing Bitcoin's future.

The USD-Driven Surge: Bitcoin's ATH and the Dollar's Role

Bitcoin's record high is inextricably tied to the weakening U.S. dollar, which has fallen below its 200-day MA—a critical technical threshold. A reveals an inverse correlation: Bitcoin rose by 21% during periods when the DXY fell by 5% or more. This dollar-driven rally, however, has a critical flaw—it is not mirrored in non-dollar terms.

Take the British pound: Bitcoin's GBP price hit a July high of £87,108, but this represented a 10.4% monthly gain, lagging behind its USD performance. Meanwhile, gold, a traditional dollar-hedge, has outperformed Bitcoin by 23.7% year-to-date (YTD), with central banks buying 244 tonnes in Q1 alone. This divergence suggests Bitcoin's strength is dollar-specific, not a reflection of intrinsic demand.

The GBP Underperformance Clue: Is Bitcoin's Strength Real?

Bitcoin's underperformance against the GBP and gold raises red flags. While Bitcoin's USD price hit $112,000, its GBP equivalent remained below its 2023 high of £89,000, even as the DXY fell. This inconsistency hints at resistance beyond dollar weakness.

shows a widening gap: Bitcoin's USD gains outpaced its GBP performance by 15% in Q3, despite the pound's decline. This suggests that Bitcoin's rally is overextended in USD terms, with institutional buyers possibly pausing until broader confirmation of its store-of-value status.

Gold's Silent Challenge: ETF Inflows and Safe-Haven Dominance

Gold's outperformance is not just about central bank buying—it's also about ETF demand. Gold ETFs like GLD saw $30 billion in inflows YTD, while Bitcoin's ETFs, though growing, remain smaller. A highlights that gold retains $10 billion in net inflow dominance.

This underscores a critical risk: Bitcoin's bid to become the new digital gold is still unproven. Gold's stability (volatility of 15.5% vs. Bitcoin's 52%) and its role in central bank reserves make it a safer haven. Until Bitcoin can sustainably outperform gold on a risk-adjusted basis—something it has yet to do—the narrative of its dominance remains contested.

DXY Dynamics and On-Chain Caution: Risks Ahead?

The DXY's breakdown below its 200-day MA has fueled risk-on sentiment, but two risks lurk:
1. DXY Rebound Risk: If the dollar stabilizes or reverses, Bitcoin's gains could reverse.
2. On-Chain Weakness: Bitcoin's negative Apparent Demand (a metric measuring buying pressure) has stayed in negative territory for 45 of the past 60 days. A shows that each dip below zero preceded a correction.

These signals suggest Bitcoin's rally is overbought, with traders taking profits ahead of potential regulatory clarity (e.g., U.S. crypto ETF approvals) or macro shifts (e.g., Fed policy).

Investment Takeaways: Buy Now or Wait for Confirmation?

Investors face a critical choice:

1. Bullish Case: If the DXY stays below its 200-day MA and Bitcoin breaches $115,000 (its next Fibonacci resistance), the rally could extend toward $150,000 by year-end. A sustained breakout above its GBP high (£89,000) would also validate its strength.

2. Bearish Caution: Until Bitcoin outperforms gold on a risk-adjusted basis (Sharpe ratio >0.9) or closes above its GBP resistance, the rally remains dollar-dependent. A DXY rebound or a prolonged negative Apparent Demand could trigger a 15-20% pullback.

Actionable Strategy:
- Aggressive Investors: Use dips below $105,000 to accumulate, but set stop-losses below $97,000.
- Conservative Investors: Wait for Bitcoin to surpass its GBP high (£89,000) and gold's YTD outperformance before committing.

Conclusion

Bitcoin's rally is undeniably impressive, but its reliance on dollar weakness and failure to outperform gold and GBP hint at fragility. While the path to $150,000 is technically possible, it requires overcoming three hurdles: a sustained DXY decline, positive Apparent Demand, and proof of gold-like resilience. Until then, this rally remains a dollar story, not yet a Bitcoin bull market. Investors should proceed with caution, balancing opportunism with the risks of overextension.

The views expressed are analytical and do not constitute investment advice. Always conduct independent research or consult a financial advisor.