DXY Plummets 2.79% Bitcoin Surges 6% as Dollar Weakens

Coin WorldFriday, Mar 7, 2025 8:22 am ET

1min read

The U.S. Dollar Index (DXY) has recently experienced one of its most significant declines in over a decade, with a sharp one-week drop that has caught the attention of market analysts. This decline, which has exceeded a negative four standard deviation move, is a rare event that has only occurred a few times in the past. Notably, these previous occurrences coincided with significant lows in Bitcoin's price, followed by substantial price gains.

Historically, the dxy Index has shown a correlation with Bitcoin's performance. In November 2022, during the FTX collapse, Bitcoin hit its cycle low of $15,500. Similarly, in March 2020, amid the COVID-19 pandemic, Bitcoin briefly fell below $5,000. In the 2015 bear market, Bitcoin traded around $250. Each of these instances was marked by a significant drop in the DXY Index, which was followed by a recovery in Bitcoin's price.

The current decline in the DXY Index is also notable for its rapid pace, outstripping the rate of decline seen during President Trump's first term. This period aligned with the 2017 Bitcoin bull run, suggesting that a weakening dollar could be favorable for risk assets, including Bitcoin. However, the DXY Index remains above 100, indicating a still strong dollar, currently at 103.8.

Market analysts have been closely watching the DXY's decline, which has dropped by 2.79% since February 5. This decline has coincided with a nearly 6% rise in Bitcoin's value, which was trading at $91,860. The weakening dollar is seen as a key factor that could boost Bitcoin in the second quarter of 2025, as investors seek alternative stores of value. Historically, a weaker dollar has led to a rise in Bitcoin's price, as seen in 2020 when stimulus measures and rate cuts fueled Bitcoin's rally from $5,000 to over $60,000 within a year.

The DXY's decline has been influenced by various economic factors, including geopolitical uncertainty and conflicting signals from the U.S. about tariffs. The JP Morgan Emerging Market Currency Index has risen in seven of this year's first ten weeks, reflecting the broader impact of the dollar's weakness on

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.