Following the Bitcoin price’s extreme loss of volatility over the past few weeks, yesterday’s rally feels like new hopium and a massive move to the upside. For the first time in three weeks, the price has surpassed $20,000 with the move coming as a surprise to many. Most recently, inflation fears and macroeconomic uncertainties have dominated the crypto market. Fundamental changes in this regard did not occur yesterday. So what was the reason for yesterday’s upswing in the Bitcoin market? Related Reading: Bitcoin Volatility Shrinks To All-Time Lows – What To Expect What is apparent is that the stock market also rose yesterday, as Microsoft and Google, among others, announced earnings. However, whether this was enough to revive Bitcoin’s volatility is questionable. A better explanation might be the Dollar Index (DXY). When the DXY began to loose its ground between 8 and 10 a.m. EDT, Bitcoin’s price surged shortly thereafter. The DXY dropped from 112.072 to 110.846 points within those two hours. During the same time, the Bitcoin price showed initial strength, which then extended into a further rally. This phenomenon is not new. For much of 2022, Bitcoin and the dollar index were strongly correlated in an inverse relationship, i.e., while the DXY was rising, BTC was falling. While the correlation has declined again in recent weeks, yesterday’s move may suggest a resumption of the correlation. Whether BTC can post more gains could thus depend on the weakness of the DXY. In this regard, the Federal Reserve (FED) is likely to be the focus of investors once again. The markets will next be eyeing tomorrow’s Gross Domestic Product (GDP) report in the United States to gauge the FED’s future policy. Currently, the U.S. economy is expected to have grown by 2.4% in Q3, which would mean that interest rate hikes are not having too much of a negative impact on the economy at this time. This, in turn, could reinforce the FED to pursue more higher interest rate hikes. As the central bank recently reiterated, it will keep raising rates until something breaks. A weakening economy could be just the first indicator that the Fed will soon have to abandon its aggressive plan to raise interest rates. The next FOMC meeting on November 02 could provide further insight into this. More Insights On The Bitcoin Price Rally Arthur Hayes, co-founder of BitMex and widely respected voice in the crypto space, found another explanation why the DXY tumbled and BTC pumped. As Hayes discussed, the U.S. Treasury is thinking about providing the market with more short-term treasury bills to mitigate a shortage. Money Market Funds like short term T-bills, but there ain’t enough so they park their money in the Fed’s reverse repo facility. […] Money in RRPs is dead money that cannot be leveraged by the banking system. Money in T-bills is ALIVE and can be leveraged to pamp risky financial assets. There is $2.2 trillion sitting in RRP, if that number goes down BOOM BABY BOOM! Let’s Fucking Go, Lambo’s for errbody! Related Reading: Bitcoin Price Rally Could Gather Pace Above $20.5K: Why Bulls Are In Control According to Hayes, RRP balances have fallen slightly over the past month. Still, the market expects this buyback action to push RRP balances down even further. However, the buy backs and re-issues of new on-the-run treasury bills have not yet taken place. If this does not happen, there could be a dramatic reversal of yesterday’s trend.