The market is at a crossroads. Drilling down further, the US dollar’s weakness reflects declining investor confidence, driven by rising debt levels and persistent rate uncertainty, both of which are undermining the dollar’s yield advantage.
This is already evident from the data. DXY fell 9.4% in 2025, its worst performance in eight years. Now the pressure has continued into 2026, with the index still down 2.23% year to date, indicating further erosion of yield support.
Historically, such setups have favored Bitcoin [BTC]. In 2017, the DXY fell below 96, and BTC rose almost 8x. A similar move in 2020, driven by liquidity injections, saw BTC rise approximately 7x in the following months.
Source: TradingView (DXY/BTC)
The question now is of course whether the script will repeat itself.
By The perspective of US President Donald Trumpa weaker dollar is considered constructive. He has argued that a softer dollar will boost exports, keep interest rates low and support GDP, making it a potential tailwind for the economy.
Meanwhile, his continued pressure on Fed Chairman Powell for rate cuts only amplifies the dollar’s weakness, suggesting the 2.23% dip could be just the start of a deeper move, forcing investors to continue rotating their capital elsewhere.
Against this backdrop, Bitcoin’s historic rallies against a declining DXY look solid, and BTC’s price drop below $90,000 reinforces the pre-breakout pattern. The most important question, however, is whether investors will follow through with this setup.
Key Bitcoin Differences
With the recent interest rate decision, the Fed clearly demonstrated its “independence”.
At the FOMC meeting, Chairman Jerome Powell resisted pressure and kept rates steady, emphasizing that policy will remain data-driven. Bitcoin responded with a modest intraday dip of 1.3% but remains well supported around $85,000.
However, this is not the only difference that puts the market at a crossroads. Bitcoin LTHs sold 143,000 BTC last month, the fastest pace in four months, pushing their net position deeper into the red.
Source: Glassnode
According to AMBCrypto, this suggests that LTHs are not purchasing the DXY thesis.
Even as President Trump supports a softer dollar, Analysts remain wary about the long-term prospects. The US, the world’s largest importer, faces inflation risk, a headwind that could undermine Trump’s interest rate cut narrative.
In this environment, it is not surprising that Bitcoin is failing to follow its historic rallies against the dollar. If bids become weaker, investor confidence could decline even further. pushing capital into safer assets even more aggressive.
Final thoughts
- DXY’s decline, combined with Trump’s support for a softer dollar, sets the stage for Bitcoin.
- LTHs are disappearing, and rising inflation risk could undermine the rate cut narrative, straining investor confidence and driving capital toward safer assets.