Dollar Strengthens Over 3% After Election, Mirroring Trends from Trump’s First Term

Following U.S. President-elect Donald Trump’s resounding election win two months ago, the U.S. dollar has strengthened by more than 3%, reflecting a pattern seen after his 2016 victory. The DXY Index, which measures the dollar’s value against a group of major currencies, surged in December 2016 before declining for the next year, aligning with bitcoin’s (BTC) bull market in 2017.

However, this time the outlook for the dollar may differ. The DXY has continued its upward trajectory, showing no signs of fading. Analysts attribute this to Trump’s economic policies and the Federal Reserve’s actions, which are expected to support the greenback’s upward momentum.

While a rising dollar typically dampens the performance of risk assets, Trump’s support for bitcoin has had the opposite effect, contributing to the cryptocurrency’s rise since his election. Bitcoin recently hit new record highs, though it currently sits about 10% below its mid-December peak of $108,300. According to Andre Dragosch, Bitwise’s Head of Research in Europe, while the pace of bitcoin’s rally might slow, the cryptocurrency’s growth potential remains intact.

“The Fed is in a tough spot right now,” Dragosch said in an interview over X. “They have to decide between risking a recession with insufficient action or letting inflation soar by acting too late.”

Trump’s pledge to impose tariffs on key trading partners could increase global geopolitical uncertainty, fueling additional demand for the dollar, which is traditionally viewed as a safe haven during periods of unrest.

The U.S. economy is also outpacing other markets, with GDP growth exceeding 3% and inflation running above target levels. This strong economic performance has led the Federal Reserve to keep interest rates high, with just two rate cuts projected for 2025.

“Markets have adjusted to the fact that the Fed is only expected to cut rates twice in 2025, a much smaller reduction than previously anticipated,” Dragosch noted. “That’s one of the key drivers behind the dollar’s strength, pushing yields up and putting pressure on bitcoin. The broader macroeconomic conditions are proving to be a significant headwind for cryptocurrencies.”