Steep Dollar Index Decline—Fourth Largest in a Decade—Suggests Bitcoin’s Downtrend May Be Ending

Dollar Index Sees Rare Drop, Historically Precedes Bitcoin Bottoms

The U.S. Dollar Index (DXY) just recorded one of its sharpest weekly declines since 2013, a move that has historically signaled major bitcoin (BTC) cycle lows.

According to Bloomberg data from Global Macro Investor, the recent drop in the DXY surpassed a negative four standard deviation move—an exceptionally rare occurrence. This extreme event has only happened three times before in BTC’s history, each coinciding with a significant market bottom:

  • November 2022 – Bitcoin hit $15,500 amid the FTX collapse.
  • March 2020 – BTC briefly dipped below $5,000 during the COVID-19 market crash.
  • 2015 Bear Market – Bitcoin hovered around $250 before a prolonged uptrend.

In each case, bitcoin saw significant gains in the months following the DXY’s steep drop.

What This Means for Bitcoin

CoinDesk research indicates that the DXY is now falling at a faster pace than it did during Trump’s first term, a period that overlapped with the 2017 bitcoin bull run. While a declining DXY typically benefits risk assets like BTC, the index remains above the key 100 level, currently standing at 103.8.

Should the dollar continue to weaken, bitcoin may see further upside momentum, reinforcing the historical pattern of dollar downturns fueling BTC rebounds.

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