Bitcoin’s price drop below $114,000 on Friday coincided with the US Dollar Index (DXY) climbing to its highest level in over two months. Traders are now eyeing Bitcoin to reclaim the $120,000 mark as the US dollar shows signs of weakness. The DXY fell to 98.5 after a weaker-than-expected US jobs report for July.

A softer US dollar can support Bitcoin’s price, but recession fears may cap gains. Between June and September 2024, the DXY declined, but Bitcoin struggled to hold above $67,000. Analysts track the ICE BofA High Yield Option-Adjusted Spread to gauge market sentiment, signaling caution or risk appetite.

The ICE BofA high yield spread spiked in August and September 2024, aligning with a weaker dollar and falling Bitcoin prices. It dropped sharply to 2.85 by late July 2025, matching Bitcoin’s rally from its $74,500 low in April. The US corporate bond market totals $11.4 trillion and influences the economy substantially.

Higher borrowing costs from a rising spread may hinder Bitcoin bulls. Currently near 3, the spread sits close to its 200-day moving average, indicating a neutral market stance. Uncertainty in US labor market conditions and global trade tensions may impact Bitcoin’s short-term outlook. Trading funds into short-term US Treasurys or seeking higher yields abroad could weaken the dollar.

Read more at Cointelegraph: Bitcoin’s Return to $120L May Have to Wait Despite a Weakening Dollar