One thing that has been consistent since US President Donald Trump took office? The US dollar continues to slide. In 2025, the DXY fell 9.4% – its worst run since 2017. And yet it shows no signs of stopping.
Fast forward to early 2026, and the DXY is already down 1.4%, back to 2022 levels. And if you remember, that was the year the crypto market absolutely crashed, losing 65% of its market cap.
In this context, the 24% decreases crypto market cap so far this year is no fluke. Investors are clearly keeping an eye on the dollar, and the way things are shaping up is starting to become a key metric for crypto’s H2 moves.
Source: TradingView (DXY/USD)
On the macro side, optimism around rate cuts is increasing, and there are good reasons for this. The market expects the new Fed chairman to keep his promise of further cuts, and now even the data supports this call.
The Truflation inflation index has been cooling off lately, pushing investors toward a dovish stance. The result? The probability of an FOMC rate cut in March just rose from 9.4% last week to 21.2% at the time of writing.
In short, the market is pricing at the first rate cut of 2026. But here’s the kicker: the falling dollar could shake things up even more. Analysts expect another 10% decline in the DXY if the Fed actually pulls the trigger on spending cuts.
The question, of course, is: Is crypto about to suffer another 2022-like destruction?
Rate Cut in March Addresses Debt Pressure – Risks to Crypto Rally
There’s a big reason why crypto diverged in the 2025 cycle.
Normally, a falling DXY is a green light for risky assets. Investors tend to abandon safe havens such as bonds when interest rates fall. And yet, in 2025, crypto ended the year down 7.8% – roughly the DXY’s 9.4% decline.
What went wrong? Interest payments on US debt to foreign holders reached a record $292 billion in the third quarter of 2025. Investors saw the intent as risky as the high debt levels brought the risk of a liquidity crisis, limiting gains for crypto.
Source: Bureau for Economic Analysis
Now, one An interest rate cut could push the dollar even further downwhich normally makes bonds less attractive and crypto more attractive. However, with China losing government bonds and government bond yields piling up, yields are also under pressure.
Simply put, rate cuts mean more capital, and a 10% drop in the DXY would normally be a green light for crypto. But with the ‘dollar war’ between the US and China threatening higher interest ratesa new liquidity crisis could hit hard.
That’s why the 23% drop in crypto, which follows the DXY’s 1.4% drop, is not random. Instead, it is a sign of stress in the system. In this context, rate cuts could be more bearish than bullish for crypto’s rally in the second half of the year.
Final thoughts
- Falling DXY usually boosts cryptocurrencies, but record US debt payments and the sell-off of Chinese government bonds are causing liquidity stress.
- Even with a March rate cut and a potential 10% DXY decline, systemic stress means crypto’s H2 rally could face headwinds.