A sharp drop in the US Dollar Index (DXY) could pave the way for a Bitcoin rally, according to Jamie Coutts, Chief Crypto Analyst at Real Vision. In a March 7 post on X, Coutts highlighted historical trends showing that significant declines in the DXY often coincide with major Bitcoin uptrends.
Bitcoin’s Historical Response to DXY Drops
Coutts conducted a backtest analyzing instances where the DXY dropped by more than 2%. His findings revealed that Bitcoin recorded an average gain of 31.6% within the following 90 days, with a 94% win rate. Moreover, when the DXY fell by more than 2.5%, Bitcoin posted gains 100% of the time, averaging a 37% return.
“When looking at this recent move in the DXY through a historical lens, it’s challenging to be anything but bullish,” Coutts stated. “All instances of a sharp DXY decline have occurred at Bitcoin bear market troughs or key inflection points.”
Weaker Dollar, Stronger Bitcoin?
The DXY, which measures the value of the U.S. dollar against a basket of major currencies, is often seen as an inverse indicator for risk assets like Bitcoin. A weakening dollar typically pushes investors toward alternative stores of value, such as Bitcoin, as they seek protection against currency depreciation and economic uncertainty.
The latest decline in the DXY comes amid rising market volatility, fueled by Trump’s tariff policies on Canada and Mexico, as well as his administration’s push for a national crypto strategic reserve and regulatory clarity. The upcoming White House Crypto Summit has also contributed to market speculation about Bitcoin’s future trajectory.
Current Market Outlook and Institutional Confidence
Bitcoin is currently trading around $87,800, reflecting a 4% decline in the past 24 hours. While the broader crypto market remains under pressure, with mixed performances from altcoins, analysts believe the recent downturn may signal an upcoming bullish reversal.
Coutts also noted that the 365-day new lows in the Top 200 crypto index have reached 47%, a level historically seen before major market rebounds. If trends hold, a combination of a weaker dollar and increasing institutional interest may propel Bitcoin toward sustained gains in the coming months.
Macroeconomic Factors at Play
The Federal Reserve’s next monetary policy decisions will be crucial in determining the short-term direction of Bitcoin and broader financial markets. With economic uncertainty persisting, analysts believe macroeconomic shifts could further strengthen Bitcoin’s appeal as a hedge against fiat currency volatility.
As Bitcoin’s price movement continues to align with historical trends, investors and analysts alike are closely watching whether the declining dollar will be the catalyst that drives Bitcoin to a new all-time high by May.
