The Old Playbook Said "Weak Dollar = Bitcoin Moon." The Data Says Otherwise
For the better part of a decade, the crypto market operated on a simple thesis: when the dollar weakens, bitcoin strengthens. It was the trade that launched a thousand macro threads. But as of February 17, 2026, the data is telling a different story, and fund managers sitting on $702 billion in assets are about to find out.
Bank of America's February 2026 Global Fund Manager Survey, conducted between February 6 and 11 among 42 fund managers, shows that dollar positioning has fallen to its most underweight level since the data series began in January 2012. A net 23% of respondents are overweight the euro, a record high going back to October 2004. "Short U.S. dollar" now ranks as one of the three most crowded trades, cited by 12% of those polled, behind only "Long Gold" at 50% and "Long Magnificent 7" at 20%.
In any previous cycle, this would be unambiguous fuel for bitcoin. A weaker dollar historically meant cheaper entry for foreign buyers, a more accommodative Fed, and a risk-on tilt across speculative assets. But bitcoin's 90-day correlation with the U.S. Dollar Index hit 0.60 on Monday, the highest reading since April 2025, turning the entire framework on its head.
Fourteen Months of Correlation Drift
The shift did not happen overnight. Since early 2025, bitcoin and the dollar have been drifting into positive territory, moving in the same direction more often than not. The Dollar Index has dropped roughly 9% since the start of 2025 and another 1% year-to-date in 2026. Over that same stretch, bitcoin has fallen 6% in 2025 and 21% year-to-date in 2026, with the price hovering near $68,150 as of the article's publication.
That is not what the textbook says should happen. If the inverse correlation still held, a 10% decline in the dollar should have been a tailwind. Instead, both assets have been sinking together, which suggests the forces acting on bitcoin right now, risk deleveraging, tech sector selloffs, and institutional repositioning, are overpowering the traditional dollar arbitrage.
The timing is not a coincidence. The labor market narrative has become the dominant macro driver. Respondents to BofA's survey pointed to U.S. labor market deterioration as the primary catalyst for their dollar bearishness, reasoning that weaker hiring data would push the Federal Reserve toward rate cuts. But rate-cut expectations have not translated into bitcoin bids the way they did in 2020 or 2023. The market's muscle memory is being retrained.
A Crowded Trade With a Trap Door
The most dangerous number in the survey may not be the dollar positioning itself but the crowding. When 12% of fund managers voluntarily name "Short USD" as one of the most crowded trades, the setup for a violent short squeeze is already in place.
"Record short positioning raises the risk of volatility in major USD pairs," said Eamonn Sheridan, InvestingLive Chief Asia-Pacific Currency Analyst. "Downside may extend on weak US data, but crowded trade dynamics increase potential for sharp short-covering rallies."
A dollar short squeeze, where forced buying drives the greenback sharply higher, used to be bitcoin's worst-case scenario. Under the old inverse correlation, a dollar spike would hammer BTC. Under the new positive correlation, a dollar rally could theoretically drag bitcoin higher with it. The problem is that nobody knows which regime the market will be operating in when the squeeze arrives. A correlation of 0.60 is not 1.00. It could snap back to negative at any moment, leaving traders exposed in both directions.
What This Means for Bitcoin Holders Right Now
If you are sitting in bitcoin and waiting for the "weak dollar = BTC pump" trade to play out, the data says you may be waiting for a catalyst that no longer works the way it used to. Here is what matters:
The Fed pivot trade is priced differently now. In previous cycles, rate-cut expectations lifted bitcoin within days. In 2026, the market is pricing cuts as a response to economic weakness, not as a proactive easing cycle. Weakness-driven cuts are risk-off, not risk-on. Bitcoin is being treated as a risk asset, not a hedge.
Dollar positioning is at an extreme. Extremes tend to mean-revert. If the dollar bounces hard off this positioning extreme, the positive correlation could amplify a BTC rally or, if the correlation flips back to negative mid-move, create whipsaw conditions that punish leveraged positions on both sides.
Institutional flows are the tiebreaker. The correlation shift coincides with bitcoin ETFs bleeding. As we reported, bitcoin and ethereum funds lost $838 million in a single week while SOL and XRP products attracted inflows. Until institutional money rotates back into BTC-specific vehicles, the dollar correlation may remain an unreliable signal.
The Broader Ecosystem: Stablecoins as the Real Dollar Trade
While traders debate whether to fade the dollar or ride the correlation, the stablecoin market has been quietly telling its own story. Circle printed $2.6 billion in USDC in a single week as stablecoin supply crossed $73 billion. The demand for dollar-denominated digital assets is surging even as fund managers bet against the physical dollar.
This creates an interesting split. The "dollar" that matters in crypto, USDC and USDT, is expanding aggressively. The dollar that matters in macro, the DXY, is being sold by institutional money. For crypto card users who spend stablecoins directly, this means their purchasing power is tethered to a currency that fund managers are collectively shorting but that stablecoin issuers cannot mint fast enough to meet demand.
The CLARITY Act, now in its final legislative stages, could further complicate the picture by formalizing stablecoin reserve requirements, potentially creating a two-tier dollar system: one that Wall Street shorts and one that crypto users spend.
For holders of self-custody crypto cards, the practical takeaway is to watch the correlation, not just the direction. A falling dollar does not automatically mean your BTC balance is appreciating in purchasing power anymore.
FAQ
What does "record dollar underweight" mean in practical terms? It means that among the 42 fund managers surveyed by Bank of America, managing a combined $702 billion, their allocation to dollar-denominated assets is at the lowest level since the survey began tracking this data in January 2012. They are collectively betting the dollar will continue to weaken.
Why has bitcoin's correlation with the dollar turned positive? The shift appears driven by both assets responding to the same macro forces, particularly risk sentiment and tech sector performance, rather than bitcoin acting as a dollar hedge. Since early 2025, the 90-day correlation has been trending upward, reaching 0.60 as of February 17, 2026.
Does a weaker dollar still help bitcoin? Historically yes, but the current data suggests the relationship has broken down. Both the dollar and bitcoin have fallen together over the past 14 months. Until the correlation reverts to its historical negative range, traders should not assume that dollar weakness will automatically lift BTC.
What could cause the correlation to flip back? A major bitcoin-specific catalyst, such as a new spot ETF approval in a major market, a supply shock from the halving cycle, or a wave of institutional accumulation, could decouple BTC from broader macro assets and restore the inverse relationship.
Overview
Bank of America's February 2026 fund manager survey reveals that dollar positioning has hit its most bearish level since 2012, with 42 managers overseeing $702 billion collectively underweighting the greenback. Under the old macro playbook, this would be unambiguous fuel for bitcoin. But a 0.60 positive correlation between BTC and the Dollar Index, the highest since April 2025, means the traditional "weak dollar = crypto rally" thesis is no longer reliable. Both assets have fallen in tandem over the past 14 months. For bitcoin holders, the signal is clear: stop watching the dollar for direction and start watching institutional flows, stablecoin demand, and the correlation itself.
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