U.S. GDP Growth at 3% Lifts Dollar Index to Multi-Week High; Bitcoin Shows Caution

Bitcoin Wavers Below $118K as Strong U.S. Growth Data Fuels Dollar Rally

Bitcoin (BTC) traded cautiously below the $118,000 mark on Tuesday as stronger-than-expected U.S. economic growth lifted the dollar to a five-week high, adding pressure to risk assets and stirring concern over crowded short positions in the greenback.

The dollar index (DXY), which tracks the U.S. currency against a basket of major peers, climbed to 99.34—its highest level since June 23—following data that showed the U.S. economy expanded at a 3% annualized rate in the second quarter.

The surprise uptick in GDP was driven by a sharp decline in imports, while consumer spending rose to 1.4%, rebounding from just 0.5% in Q1. Meanwhile, inflation cooled, with the gross domestic purchases price index falling to 1.9% from 3.4%.

The upbeat data reinforced expectations that the Federal Reserve will keep interest rates steady at its policy meeting on Wednesday.

After a sharp slide earlier in the year, the dollar has recently found stability—raising the risk of a short squeeze in a market where bearish bets on the greenback have become crowded. Such a move could trigger broader risk-off sentiment across equities, emerging markets, and crypto.

“Near-term risks are building from overloaded dollar short positions,” said QCP Capital’s Market Insights team. “The prevailing 2025 narrative has been centered on continued dollar weakness driven by the Tariff War. But with the DXY already down 10% year-to-date, the downside may be largely priced in.”

QCP pointed specifically to the USD/JPY trade, where short positioning is extreme and costly to maintain. “The setup is vulnerable to a dollar rebound, which could lead to a wave of position unwinds across risk assets,” the firm noted.