Dollar Drops, Crypto Rises: What’s the Connection?
The US Dollar Index (DXY) has been going down lately, and that’s got the crypto world excited! Financial expert Raoul Pal thinks this could mean a great quarter for cryptocurrencies. Let’s find out why a falling dollar might be good news for crypto.
What’s the US Dollar Index (DXY)?
The DXY is like a report card for the US dollar. It shows how strong the dollar is compared to other major currencies like the euro, Japanese yen, and British pound. When the DXY goes down, it means the dollar is getting weaker compared to these other currencies.
DXY and Crypto: An Inverse Relationship
Historically, when the dollar is strong, crypto prices tend to be low, and when the dollar is weak, crypto prices tend to go up. This is because when the dollar is weak, investors might turn to cryptocurrencies as a way to protect their money from inflation and economic instability[5].
Recent Market Moves
In early 2025, the DXY started to drop. On February 14, it fell by 0.5% to 97.23[1]. Guess what happened to crypto prices? They went up! Bitcoin (BTC) rose by 2.02% to $43,000, and Ethereum (ETH) increased by 1.79% to $2,850[1].
Not only that, but trading volumes for both BTC and ETH also went up. BTC’s volume surged by 15%, and ETH’s by 12%[1].
Altcoins Join the Party
The weakening dollar also helped altcoins. On March 4, 2025, when the DXY fell to 95.23, altcoins like Ethereum, Cardano (ADA), and Solana (SOL) saw big price gains. Ethereum rose by 3.2%, Cardano by 4.1%, and Solana by 5.6%[3].
Investors seem to be buying these cryptocurrencies because they think they’re a good way to make money when the dollar is weak[3].
Technical Indicators Say “Buy!”
Technical indicators for major cryptocurrencies are looking good. The Relative Strength Index (RSI) for Bitcoin was at 65, which means there’s strong buying pressure but it’s not too high[1]. The Moving Average Convergence Divergence (MACD) for Bitcoin also showed a bullish crossover, which is a positive sign[1]. On-chain metrics, like the number of active Bitcoin addresses and the hash rate, are also looking good[1].
So, Is a Strong Crypto Quarter Ahead?
What’s the Bottom Line?
The falling DXY has usually meant good things for crypto in the past. When the dollar is weak, investors might turn to cryptocurrencies to protect their money. This has led to price increases for both Bitcoin and altcoins. But remember, the crypto market can change quickly, so it’s important to stay alert!
References:
cn.blockchain.news, blockchain.news, radioelementi.it, supplychaingamechanger.com