The drop of the U.S. Dollar Index (DXY) below 98 for the first time in three years has created an environment where risky assets like cryptocurrencies could gain value.
The U.S. Dollar Index (DXY) is an important indicator that measures the strength of the dollar against major global currencies. For the first time since the beginning of 2022, the index has fallen below 98, highlighting a significant change in the markets. This decline could create a positive ground for a new wave of increases in cryptocurrencies, particularly Bitcoin (BTC).
The weakening of the dollar is generally leading to an increase in risk appetite in the markets. According to the latest data, annual inflation in the U.S. occurred at 2.4%, slightly below expectations of 2.5%. This situation has almost made it certain that the U.S. Central Bank (Fed) will lower interest rates in June. According to the CME FedWatch tool, the markets are giving a 99.8% probability for interest rates to be reduced to a range of 4.25-4.50% at the June meeting.
New Space Opened for Cryptocurrencies
In recent years, the DXY remaining above 100 meant the strengthening of the dollar, which generally had a negative impact on speculative assets like stocks and cryptocurrencies. However, in the current environment, the weakening of the dollar is creating a supportive outlook for risky assets by increasing global liquidity.
Additionally, the uncertainties in trade policies during the Trump administration and global “de-dollarization” rhetoric are said to be influencing the dollar's depreciation. If these conditions continue, a new and strong upward period may begin in the cryptocurrency markets.
