Bitcoin gets 'highly favorable' cues as DXY sets 21-year weakness record

Key points:

• The US dollar index (DXY) is below its yearly moving average and more than six points below its 200-day equivalent.
• Bitcoin should stand to benefit from the trend thanks to its traditional inverse correlation to DXY.
• BTC price action has yet to follow historical precedent on the dollar this time.

Bitcoin (BTC) stands to benefit from US debt and dollar weakness as the greenback sets a two-decade record

New research from onchain analytics platform CryptoQuant on July 8 reaffirms belief in Bitcoin’s inverse correlation with the US dollar index (DXY).

BTC price tailwinds stack up as DXY sags

BTC price strength continues to receive a tailwind from the US dollar, which this month bounced off its lowest levels versus trading-partner currencies since early 2022.

DXY fell to 96.377 on July 1, data from Cointelegraph Markets Pro and TradingView shows — a level not seen in over three years, with the dollar strength yardstick down over 10% year-to-date.

The dubious achievements, however, do not end there — CryptoQuant reveals that versus its 200-day moving average (MA), DXY is circling a zone which it last visited more than 20 years ago.

US dollar index (DXY) 1-week chart with 200-day MA. Source: Cointelegraph/TradingView“While the U.S. debt reaches a new all-time high, the DXY has just hit a historically weak level, currently trading 6.5 points below its 200-day moving average, marking the largest deviation in the past 21 years,” contributor Darkfost summarized in a “Quicktake” blog post.

“Although this may appear alarming at first glance, it actually tends to benefit risk assets like Bitcoin.”

Bitcoin has regularly demonstrated inverse correlation to DXY over its lifespan, but in recent years, the relationship has become less clear cut.

Darkfost nonetheless argues that the trend remains in place as part of a broader risk-asset investment pattern.

“As the dollar weakens and loses its safe-haven appeal, investors reassess their portfolio allocations and shift capital toward alternative asset classes,” he continued.

An accompanying chart shows the relationship between BTC price performance and the relationship of DXY to its 365-day MA.

“This chart illustrates that phenomenon by highlighting periods where the DXY trades below its 365-day moving average,” Darkfost explained

“Looking at historical data, it becomes clear that such periods have been highly favorable to BTC. We are currently in a phase where the weakness of the DXY could fuel a new rise in BTC but the price didn't reacted yet.”

US dollar index (DXY) vs. BTC/USD (screenshot). Source: CryptoQuant## Dollar makes the case to own Bitcoin

As Cointelegraph reported, US dollar weakess has accelerated thanks to the implementation of US trade tariffs.

Related: ‘False move’ to $105K? 5 things to know in Bitcoin this week

For Bitcoin proponents, meanwhile, it is fiat currency in general which is ceding prowess to crypto.

“If the dollar’s very strong, it makes the case to own it,” economist Lyn Alden told Cointelegraph last week on Bitcoin’s “main competition.”

“If total credit in the system and total dollars in the system are going to keep increasing over the next five, seven, ten years, that’s one of the macro factors that makes Bitcoin useful to own.”

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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