Bitcoin Dips Below $118K as Strong U.S. GDP Lifts Dollar to Multi-Week High
Bitcoin (BTC) slipped below $118,000 on Tuesday as the U.S. dollar strengthened in response to robust second-quarter GDP data, prompting fresh concerns over positioning in currency markets and broader pressure on risk assets.
The dollar index (DXY), which tracks the greenback against major global currencies, climbed to 99.34—its highest level since June 23—after data showed the U.S. economy grew at a 3% annualized rate in Q2, beating forecasts.
A steep decline in imports contributed significantly to the GDP surge, while consumer spending rose 1.4%, rebounding from 0.5% in the previous quarter. Meanwhile, inflation appeared to cool, with the gross domestic purchases price index easing to 1.9% from 3.4%.
The stronger-than-expected data bolstered expectations that the Federal Reserve will keep interest rates unchanged in its policy decision later Wednesday.
After a steep decline earlier this year, the dollar’s recent stabilization has raised alarm among analysts watching for a potential short squeeze. A rebound in the greenback could add downside pressure to equities, emerging markets, and digital assets like bitcoin.
“There’s rising risk from crowded short positions in the dollar,” noted QCP Capital’s Market Insights team in a client note. “The 2025 consensus has leaned heavily toward a weaker dollar narrative—fueled by the Tariff War—but with the DXY already down 10% year-to-date, the trade may be overextended.”
The firm highlighted speculative short interest in USD/JPY as particularly exposed. “Not only is it a consensus position, it’s also costly to maintain. A sudden reversal in the dollar could force widespread unwinds across crypto, EM, and equities,” the note added.
