Sharp Dollar Index Drop Historically Aligns With Bitcoin Bottoms
The U.S. Dollar Index (DXY) has recorded one of its steepest weekly declines since 2013, a move that has historically coincided with bitcoin (BTC) cycle lows.
Data from Global Macro Investor, sourced via Bloomberg, shows that the DXY’s latest one-week percentage drop has exceeded a rare negative four standard deviation move. This extreme level of downside volatility has only occurred three other times in bitcoin’s history—each marking a significant market bottom.
Past instances include:
- November 2022: Bitcoin hit a cycle low of $15,500 following the collapse of FTX.
- March 2020: Amid the COVID-19 market panic, BTC briefly plunged below $5,000.
- 2015 Bear Market: Bitcoin traded around $250 before beginning a long-term uptrend.
Each time the DXY experienced a similar sharp decline, BTC found a bottom and subsequently entered a period of strong price appreciation.
Dollar Weakness and Bitcoin’s Outlook
Further analysis from CoinDesk suggests that the current DXY decline is unfolding at a faster rate than during Donald Trump’s first presidential term, a period that coincided with the 2017 bitcoin bull run. A weakening dollar typically benefits risk assets, including BTC.
Despite the recent decline, the DXY remains above the key 100 level, currently at 103.8, signaling that the dollar is still relatively strong. However, if the index continues to slide, it could provide further tailwinds for bitcoin and broader crypto markets.
