BTC Holds Steady While Dollar Strengthens on 3% U.S. GDP Expansion in Q2

Bitcoin Holds Below $118K as Strong U.S. GDP Data Sends Dollar to 5-Week High

Bitcoin (BTC) hovered just under $118,000 on Tuesday as stronger-than-expected U.S. GDP figures lifted the dollar index (DXY) to its highest level in over a month, triggering caution across risk assets including equities and crypto.

The DXY rose to 99.34—its strongest reading since June 23—after U.S. gross domestic product grew at an annualized rate of 3% in the second quarter. The surprise upside was largely driven by a sharp drop in imports, while consumer spending rebounded to 1.4% from 0.5% in Q1, suggesting improving domestic demand. Inflation pressures also eased, with the gross domestic purchases price index slowing to 1.9% from 3.4%.

The data reinforced expectations that the Federal Reserve will hold interest rates steady during its policy meeting on Wednesday.

The dollar’s recovery marks a shift after months of declines that had taken the DXY down more than 10% year-to-date. With the greenback regaining momentum, traders are now focused on the risk of a short squeeze in the heavily shorted U.S. dollar, which could weigh on broader markets.

“There are growing near-term risks from overcrowded short positions in the dollar,” said Singapore-based QCP Capital in a market note. “The dominant view in 2025 has been one of continued dollar weakness, driven by the ongoing Tariff War—but with the dollar already significantly lower, further downside may be limited.”

The firm pointed to extreme short positioning in USD/JPY as a key vulnerability. “It’s not just a consensus trade—it’s also expensive to fund. A reversal in the dollar could trigger broad risk-off unwinds across crypto, equities, and emerging markets,” QCP warned.