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

Key points:

Bitcoin 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 Tuesday reaffirms 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.

“While the US 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 argued that the trend remains 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 said.

An accompanying chart showed 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 said. 

“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 react yet.”

US Dollar Index (DXY) vs. BTC/USD (screenshot). Source: CryptoQuant

Dollar makes the case to own Bitcoin

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

For Bitcoin proponents, it is fiat currency in general that 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.”