The US Dollar Index Drops to Near 3-Year Low, Can Bitcoin Break Through Historical Highs?
Since January 2025, the ongoing weakening trend of the US Dollar Index (DXY) may be creating potential upward momentum for risk assets like Bitcoin.
Over the past six months, the DXY has cumulatively fallen to its lowest level in over three years, deviating nearly 6.5% from the 200-day moving average (200MA), marking the most significant deviation since 2021.
This phenomenon sharply contrasts with the historical high (ATH) of the US debt scale, as historical patterns and trends suggest that such a macroeconomic environment is often favorable for risk assets like Bitcoin, even signaling the onset of a bull market or a prosperous period.
As the dollar loses its safe-haven appeal, investors are likely to reallocate assets, shifting funds towards alternative asset classes such as cryptocurrencies, thereby bringing liquidity to the market.
Although the softening of the Dollar Index has created conditions for Bitcoin's rebound, the leading cryptocurrency has not shown significant price response. Since the end of May, Bitcoin's price has been consolidating in the range of $100,000 to $110,000. However, after a 2.3% increase in the past 24 hours, BTC successfully broke through this range. According to CoinMarketCap data, at the time of this writing, Bitcoin is valued at approximately $111,300, just a step away from its historical high.
Market experts generally believe that for Bitcoin to initiate and sustain an upward trend, ultimately breaking through historical highs, the primary condition is an increase in market liquidity and demand. Despite the risk of a pullback, some analysts still lean towards a bullish outlook.
Currently, it appears that bulls are structurally dominant, making the potential momentum in the consolidation phase more inclined towards bullishness. However, regardless of the strength of the bulls, Bitcoin may still require new catalysts or clearer macroeconomic guidance to strongly break through and stabilize above historical highs.
