Bitcoin loses touch with the Dollar Index, U.S. stocks ahead of the Fed

Bitcoin's relationship with traditional markets weakened sharply ahead of the Federal Reserve's policy decision, as short-window correlations with the Dollar Index and major U.S. equity benchmarks fell toward zero. CoinMarketCap data shared with CoinDesk show bitcoin's very-short-term link to the index that tracks the dollar's strength is near +0.08, a major shift from its negative 30-day reading. Correlations to the S&P 500 and Nasdaq also slid meaningfully within a day.

Market participants point to the collapse of the Clarity Act in the Senate as the chief reason for the shift in attention. The regulatory development drew traders' focus away from macro drivers and toward crypto-specific news, reducing the usefulness of cross-asset hedges that assumed bitcoin would move with risk assets. CoinMarketCap’s head of research, Alice Liu, warned that hedging bitcoin via short S&P 500 futures may be unreliable while these correlations remain disrupted.

The Federal Reserve's rate decision, due at 2 p.m. ET, is now a test of whether bitcoin will re-establish its ties to the dollar and U.S. stocks or continue trading primarily on regulatory follow-through. Markets widely expect a 25 basis-point hike to be announced, a move largely priced in, but investors say guidance from Fed Chair Kevin Warsh and shifts in Treasury yields could still move volatility. Traders are watching the 10-year Treasury yield, which recently stood around 5% after briefly touching multidecade highs; a spike in yield volatility could tighten financial conditions and revive risk-off flows into crypto.

Technical setups in bitcoin add another layer of uncertainty. Prices had been compressed in a narrow range above about $76,000 before sellers pushed below that level, a pattern chart analysts call a range breakdown and often view as bearish. The regulatory fallout has already produced large trading impacts: exchanges liquidated roughly $571 million in long crypto futures positions after the Clarity Act failed. With correlations weakened and the Fed decision imminent, market participants will be watching both policy signals and yield moves for clues on whether bitcoin's recent idiosyncratic trading persists or reverts to tracking broader markets.