Bitcoin’s price failed to be parabolic like the US Dollar Index (DXY) Falls – Why?

Bitcoin (Btc) has dropped 12% since March 2, when it reached $ 94,000. Noteworthy, at the same time, the US dollar weakened against a basket of foreign currencies, commonly seen as a positive sign for difficult owners such as BTC.

Today’s investors are surprisingly why Bitcoin has not reacted to DXY’s denial and what could be the next factor to impress a decay from this trend.

Until mid 2024, the US dollar index (DXY) had the opposite relationship with bitcoin price, which means cryptocurrency often increased when the dollar was weakened. At the time, Bitcoin was widely viewed as a fence against inflation, thanks to its lack of relationships with the stock market and the fixed financial policy, similar to digital gold.

However, the relationship does not indicate the cause, and the past eight months have shown that the justification for Bitcoin investment has changed over time. For example, some analysts claim that the price of bitcoin is aligned with Global Monetary Supply Just as the central banks arrange, as others emphasize their role as an unimaginable money, which enables free transactions for governments and individuals alike.

Bitcoin’s acquisitions from DXY weakness may take months or years to be materialize

Julien Bittel, the head of Macro Research in Global Macro Investor, pointed out that the recent collapse of the US dollar index – from 107.6 on February 28 to 103.60 on March 7 – took place only three times in the past twelve years.

Bittel’s post on X highlights that the price of Bitcoin advanced after the final significant collapse of the DXY Index in November 2022, as well as compliance with the March 2020’s event, when the US dollar collapsed from 99.5 to 95 in the first weeks of Covid-19 crisis. His review emphasizes that “financial conditions have led to risk assets for a few months. So far, financial conditions are erasing – and fast.”

While Bittel’s comments were highly bullish for the price of Bitcoin, the positive effects of the previous US dollar weakness lasted more than six months to be material and, in some cases, even a few years, as during the 2016-17 cycle. Bitcoin’s current underperformance may be due to “short -term macro fear,” according to user @21_XBT.

The analyst temporarily cites several factors for the recent weakness of Bitcoin prices, including “tariffs, dogers, yen with trade, harvesting, DXY, growth scares,” but concluded that none of these factors change the long -term Bitcoin foundations, which suggests its price will benefit.

For example, the cutting of the US Department of Government efficiency (DOGE) is extremely positive for the economy in the medium term, as they reduce overall debt and interest repayment, liberation of resources for productivity strengthening steps. Similarly, tariffs can be proven to be useful if the Trump administration has achieved a more desirable trade balance by increasing US exports, as it can provide a way for sustainable economic growth.

Related: Crypto Market’s greatest risk in 2025: US backward, circular crypto economy

The steps taken by the US government trims excessive but unstable growth, causing short-term pain as the produce lowers the US Treasury notes, making it cheaper than refinance debt. However, there is no indication that the role of the US dollar as the world Reserve currency is weakening, and the demand for US treasurys has not reduced. As a result, the recent denial of the DXY index is not directly linked to Bitcoin’s appeal.

Over time, as the user noted @21_XBT, macroeconomic fears will disappear as central banks have adopted further expansion of financial policies to stimulate economies. This is likely to lead Bitcoin to decouple from the DXY index, which sets the stage for a new all-time high in 2025.

This article is for general information purposes and is not intended to be and should not be done as legal or investment advice. The views, attitudes, and opinions expressed here are unique and do not necessarily reflect or represent the views and opinions of the cointelegraph.