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Dollar Index Declines Below 105 as Bitcoin Hits $90K
The DXY index has now dropped to its lowest level since mid-November.
Updated Mar 5, 2025, 5:32 p.m. Published Mar 5, 2025, 9:40 a.m.
What to know:
- The DXY index, a measure of the U.S. dollar's strength, has dropped below 105 for the first time since mid-November.
- The DXY index continues to mirror President Trump's first election cycle.
- Bitcoin rose above $88,000.
At the start of the year, CoinDesk research indicated that the Dollar index (DXY) a measure of the U.S. dollar’s strength against a basket of major trading partners was mirroring its trajectory from Donald Trump’s first term as president.
Between September 2024 and January 2025, coinciding with Trump’s re-election, the DXY index climbed from 100 to 110. This current cycle, the index peaked at 110 in mid-January but has since dropped below 105 for the first time since mid-November. If the DXY were to fall to around 103, it would erase all its gains since Trump's victory in November.
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Typically, a DXY index above 100 is considered strong, which tends to put pressure on risk assets. However, as the index dipped below 105, bitcoin rose above $88,000.
A similar pattern was observed in 2017 when the DXY fell from 103 to below 90, coinciding with bitcoin’s bull run that year, that saw it top out at $20,000 in December.
Despite this, macroeconomic uncertainty persists, with concerns surrounding tariffs, inflation, and U.S. GDP growth. The economy appears to be slowing, and Friday’s jobs report is expected to show a continuation of 4.0% unemployment rate.
If the report comes in weaker than anticipated, treasury yields could continue declining, increasing the likelihood that the Federal Reserve could consider a rate cut in its March meeting.
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Coinbase Sees Crypto Recovery Ahead as Liquidity Improves and Fed Rate Cut Odds Climb
The crypto exchange also took note of a so-called AI bubble that continues to go strong and a weaker U.S. dollar.
What to know:
- Coinbase Institutional is seeing a potential December recovery in crypto, citing improving liquidity and a shift in macroeconomic conditions that could favor risk assets like bitcoin.
- The firm's optimism is driven by rising odds of Federal Reserve rate cuts, with markets pricing in a 93% chance easing next week, and improving liquidity conditions.
- Several recent institutional developments, including Vanguard's crypto ETF policy reversal and Bank of America's greenlighting of crypto allocations, have contributed to bitcoin's rebound from recent lows.
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