It is well known that different asset classes are correlated. Bitcoin, for example, often moves in sync with the stock markets, as seen during the 2020 market crash and subsequent recovery. When equity markets fell sharply in March 2020, Bitcoin also plummeted, only to rally alongside tech stocks in the following months. However, some correlations do not happen simultaneously but instead act with a time delay, also known as a “lag.”

Using Lag Analysis for Bitcoin

In this analysis, I explored the relationship between Bitcoin and the Dollar Index (DXY) using Timing Solution, a software specialized in time-series analysis. One of its key features is Intermarket Analysis, which allows us to examine correlations with a time shift.

Bitcoin and the Dollar Index: A Leading Indicator?

A significant finding is that Bitcoin and the Dollar Index are connected over time. In particular, the Dollar Index can serve as a potential leading indicator for Bitcoin’s future price movements.

The results show the strongest correlation when shifting the Dollar Index 222 days into the past (lag 222). In other words, historical movements in the Dollar Index appear to anticipate Bitcoin’s price action by approximately 222 days.

What This Model Predicts

According to this time-lagged correlation, the recent market correction or difficult period for Bitcoin might not be over yet. The model suggests that a new bull market could start around late April or early May and potentially last until mid-September.

Important Notes

• The red line in the chart represents the Dollar Index but does not reflect Bitcoin’s price level. It only shows the directional movement.
• Correlations, even with historical accuracy, do not guarantee future performance. External market forces, macroeconomic events, and policy decisions can impact Bitcoin independently.

Risk Disclaimer

This analysis is for informational purposes only and does not constitute financial advice. Markets are unpredictable, and investors should conduct their own research or consult with a financial professional before making any investment decisions.