Will Bitcoin Bounce Back? Unraveling the DXY-Bitcoin Connection
The cryptocurrency market is currently experiencing a downturn, driven by global economic aspects. Yet, analysts are keeping a keen eye on the US dollar index (DXY), whose recent fluctuations suggest Bitcoin could be poised for a rebound. Historically, when the DXY takes a nosedive, Bitcoin tends to hit a low before rocketing upwards. Experts are speculating that if this trend persists, Bitcoin could rally, possibly breaking latest price records. Investors at the moment are closely monitoring the DXY-Bitcoin relationship to see if this trend holds true.
Bitcoin Takes a ten% Hit: Economic Chaos at Play
Global economic worries have knocked Bitcoin and the broader crypto market down a couple of pegs in recent weeks. The US Federal Reserve’s rate of interest cuts have solid a shadow over the market. Add to this the continued global trade tensions and tariffs, and you have a recipe for a major decline in risk asset markets. Historically, cryptocurrencies have been sensitive to economic jitters and announcements like rate cuts or inflation data. As a result, Bitcoin’s value has dropped by 10% over the past two weeks.
DXY Plummets: A New Chapter for Bitcoin Prices?
This week, the US dollar index (DXY) has experienced one among its sharpest declines since 2013. Notably, the same drop occurred in November 2022, partly resulting from the FTX debacle, which also pushed Bitcoin to its lowest point. Interestingly, Bitcoin’s price often moves inversely to the DXY. With this development, crypto investors are hopeful that risk assets like cryptocurrencies might see a surge.
Beyond the 2022 dip, the DXY has had two other significant falls. The first was in 2015, amidst a declining economic market, with Bitcoin trading at around $250. The second occurred in 2020 through the economic pressures of the COVID-19 pandemic. In all three instances, the DXY saw drops of 4 standard deviations, and Bitcoin hit a bottom.
DXY Slips 3%—Could Bitcoin Be on the Verge of a Historic Surge?
Bitcoin has a knack for bouncing back after hitting all-time low, often kicking off a bullish trend. For example, in 2022, Bitcoin plummeted to $15,000 before reversing the trend. Recently, the DXY has fallen over 3% since March 3, dropping from 107 to 103. This 4-point decline could signal to investors that a crypto rally could be on the horizon. There are other links between DXY and Bitcoin that support this evaluation.
Chart 1: Courtesy of Merlijn The Trader, published on Tradingview, March 8, 2025.
Based on Chart 1, crypto analyst Merlijn The Trader has delved into the DXY-Bitcoin correlation. Her evaluation shows that each time the DXY records a bearish Moving Average Convergence Divergence (MACD), Bitcoin tends to surge. Daan Crypto Trader, one other industry expert, supports this optimistic outlook together with his own Bitcoin price prediction.
The Path to $120K: What Needs to Happen
Daan Crypto’s prediction suggests that if Bitcoin continues to consolidate around its range lows, a future all-time high of $120,000 is nearby. He explains that we’ve seen this pattern in other consolidations through the current cycle: Bitcoin dips even lower, stabilizes, retakes its range, and climbs higher.
Is a Bitcoin Rally on the Horizon? Key Indicators to Watch
Investors should keep watch over Bitcoin’s consolidation and resistance levels. Maintaining critical supports could trigger a breakout. However, caution is suggested as economic policy changes and regulations still influence market sentiment. In navigating volatility, diversified strategies and risk management are essential, while macroeconomic signals needs to be closely monitored. If the DXY continues to drop and rates of interest rise, Bitcoin might just enter a sustained bullish phase.
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