- With the U.S. federal deficit reaching $316 billion in May, investors are shifting into inflation hedges like Bitcoin and gold, with the US Dollar Index collapsing.
- As BTC strengthens, traditional assets lag behind, S&P 500 has fallen 15% against Bitcoin this year.
The U.S. Dollar Index ($DXY) has been plummeting to record-low values since 2021, and Bitcoin (BTC) has been on a parabolic trend. The BTC price soared to yet another peak of $123,000 in July 2025. The uncoupling of the classical financial measures and cryptocurrencies is an indication of a wider transition that’s taking place in the macroeconomic environment.
Impact Of Weakening US Dollar On Bitcoin
As reported by CNF, Bitcoin, having surpassed the $123,000 threshold on July 14, has gained more than $15000 in value since July 3 when the U.S House ratified the famous oversized Big Beautiful Bill presented by President Donald Trump. Further, in the past three months alone, the crypto market has surged by over $1 trillion in capitalization.
“This is not ‘normal,’” wrote The Kobeissi Letter in a recent X post. They added, “Bitcoin has entered ‘crisis mode.’ Bitcoin has reached a point where it is quite literally making new all-time highs multiple times a day.”
As the U.S. dollar plunged by about 11% in the last six months, both Bitcoin and gold produced a huge surge. The divergence has intensified since two critical inflection points: April 9, following the 90-day tariff pause, and July 1, as optimism built around the passage of the spending bill.
This week, the U.S Treasury announced that the federal deficit reached $316 billion in May, the third-largest monthly deficit recorded. Thus, investors appear to be rapidly rotating into inflation-hedging assets. The Kobeissi Letter wrote, “Yields are rising, Bitcoin is rising, the USD is falling, and gold is rising.”
BTC ETFs Gain Momentum Against Gold
The institutions have not been left behind. In just under a year, BlackRock spot Bitcoin ETF, IBIT, has amassed over $83 billion in assets under management. In comparison, the biggest gold ETF, GLD, achieved the same level after more than 15 years. The post further said that Bitcoin can no longer be disregarded by family offices, hedge funds, and institutional capital.
Also, BTC ETFs have already captured 70% of gold ETF inflows year-to-date. In addition, companies like Michael Saylor’s Strategy and Metaplanet are continuously buying Bitcoin as institutional interest grows.
Other market forces are still transforming in the face of this boom. When measured against Bitcoin, the S&P 500 has already lost 15% year-to-date, not to mention a 99.98% decline since 2012. In the meantime, there is an increasing amount of bearish bets made in relation to Ethereum (ETH), which points to short squeeze possibilities.
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