Declining Dollar Index Could be a Tailwind For Crypto: Analysts

The US Dollar Index (DXY) has fallen to a fourth-month low this week as concerns about sluggish expansion in the world’s largest economy amid escalating trade tensions.

DXY tanked to 104.13 on March 6, its lowest level since early November, according to Tradingview. The US Dollar Index is an index of the value of the greenback relative to a basket of foreign currencies.

A declining DXY is often associated with a shift toward riskier assets like stocks and crypto as investors move away from the safety of the USD.

The index has just broken down from a head and shoulders topping pattern, reported Bravos Research, before adding:

“This could be a major tailwind for risk-on assets.”

BREAKING: US dollar has just broken down from a head and shoulders topping pattern

This could be a major tailwind for risk-on assets pic.twitter.com/Ghf7kdI9Iq

— Bravos Research (@bravosresearch) March 5, 2025

Crypto to Benefit?

When the dollar weakens, investors look for alternative stores of value, including Bitcoin, crypto assets, and gold, which often rallies when the greenback falters.

Since most crypto assets are priced in USD, a weaker dollar also means it takes more dollars to buy the same amount of BTC or ETH, which can push prices higher. Macro investor Raoul Pal echoed the sentiment, stating that the second quarter of the year should be good for crypto.

“With the dollar, rates and oil headed lower, financial conditions are now easing fast and lead risk assets by a couple of months. Should signal a good Q2 for tech and crypto and hopefully H2 2025, too as these trends continue.”

Ricardo Evangelista, senior analyst at ActivTrades, said, “Traders have shifted from pricing in growth and inflationary pressures from Trump’s tariffs to anticipating a slowdown in the US economy as the country moves towards protectionism.”

“Overall, the dollar is on the turn,” commented Societe Generale FX strategist Kit Juckes in a note on March 5. “From multi-decade highs, the dollar has limited upside, even if a catalyst for a fall has been absent until now,” he added.

BREAKING : U.S. Dollar

U.S. Dollar Index $DXY falls below its 200 Day moving average for the first time since November pic.twitter.com/7gLlRT9PnW

— Barchart (@Barchart) March 5, 2025

Crypto Market Outlook

Crypto markets have already started to show signs of recovery today, with total capitalization gaining 2.3% to top $3.1 trillion.

Bitcoin recovered from its dip earlier this week, topping $92,500 during morning trading in Asia on Thursday. Meanwhile, Ethereum is slowly grinding higher from its 16-month low, adding 6% on the day to reach $2,300. Altcoins are predominantly in the green, with bigger gains for Pi Network (PI), Chainlink (LINK), and Bitcoin Cash (BCH).