Investors have turned decisively bearish on the U.S. dollar, with positioning hitting its most negative level in more than a decade, according to Bank of America’s February fund manager survey. The crowded trade could spark fresh swings in bitcoin — though not necessarily in the way traders might expect.

The survey shows net dollar exposure has fallen to its deepest underweight reading since at least early 2012. Fund managers pointed to fears of a deteriorating U.S. labor market that could prompt the Federal Reserve to lower interest rates in the months ahead.

Historically, bitcoin has tended to move inversely to the U.S. Dollar Index (DXY). Because BTC is priced in dollars, a weaker greenback generally makes it more attractive to international buyers. Meanwhile, a strong dollar tightens global financial conditions, often weighing on risk assets such as cryptocurrencies. Under that framework, record bearish positioning in the dollar would typically be seen as supportive for bitcoin.

Recent data, however, suggest the relationship has shifted.

Since early 2025, bitcoin has shown a positive correlation with the dollar. The DXY slid more than 9% last year and has edged lower again this year, yet bitcoin has also declined — down 6% in 2025 and about 21% year-to-date. Figures from TradingView show the 90-day correlation between BTC and the dollar index recently climbed to 0.60, the highest level since April 2025.

If this positive correlation persists, further dollar weakness could align with additional downside in bitcoin — reversing the long-standing inverse pattern. On the other hand, a rebound in the greenback could lift BTC if the two assets continue moving in tandem.

One potential catalyst for a dollar rebound is a short squeeze. With positioning heavily skewed toward dollar weakness, any upside surprise in economic data could force traders to unwind short positions rapidly. That scramble to cover could send the dollar sharply higher and amplify volatility across currency and crypto markets.

“Record short positioning raises the risk of volatility in major USD pairs; downside may extend on weak U.S. data, but crowded trade dynamics increase potential for sharp short-covering rallies,” said Eamonn Sheridan, chief Asia-Pacific currency analyst at InvestingLive.

At the time of writing, the dollar index was up 0.25% at 97.13, while bitcoin traded near $68,150, down roughly 1% on the day, according to data from CoinDesk.