The Dollar Keeps Weakening — Is the Next Bitcoin Bull Run Coming?

Last updated:07/01/2025

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Summary

Since the beginning of this year, the U.S. Dollar Index (DXY) has continued to decline, prompting global capital to seek new safe-haven assets. Bitcoin, widely recognized as “digital gold,” is once again in the spotlight. Easing macro conditions combined with Bitcoin’s inherent scarcity may signal that a new entry window is opening — how should investors position themselves?

Main Text

Since early 2025, the U.S. Dollar Index (DXY) has shown a clear downward trend, drawing the attention of investors worldwide. The sustained weakness of the dollar not only signals declining confidence in the greenback but also typically implies a repricing of risk or safe-haven assets. Against this backdrop, Bitcoin (BTC), often dubbed “digital gold,” has naturally become a market focal point.

1. Core Reasons Behind the Dollar’s Decline

A declining Dollar Index generally reflects expectations of slower U.S. economic growth, lower interest rates, or looser monetary policy. Recently, the Federal Reserve has kept rates unchanged, but Chair Jerome Powell has clearly indicated that inflation is trending downward and economic growth is slowing — suggesting that rate cuts may be on the table.

According to the latest data from the U.S. Bureau of Labor Statistics, in May 2025, the U.S. Consumer Price Index (CPI) rose by just 0.1% month-over-month, lower than the market forecast of 0.2%. Core CPI also rose by only 0.1%, noticeably below the previous expectation of 0.3%. This has further strengthened market expectations of a rate cut within the year. CME interest rate futures currently imply a 76.3% probability that the first cut will come in September.

In this environment, the Dollar Index has come under significant pressure — falling from 110.5 at the start of the year to around 97, a decline of about 12.2%. The weaker dollar reflects fading risk aversion and increased demand for inflation-hedging assets.

2. Historical Correlation Between the Dollar Index and Bitcoin

Historical data shows a clear negative correlation between the Dollar Index and Bitcoin prices: when the Dollar Index declines, Bitcoin often performs strongly.

For example, from March 2020 to April 2021, driven by the Fed’s ultra-loose monetary policy, the Dollar Index fell sharply from 103 to around 89, a drop of more than 13%. Over the same period, Bitcoin surged from about $7,000 to over $60,000, a gain of over 750%. A similar trend appeared from March 2023 to early 2024, when the Dollar Index dropped from 104 to 95 while Bitcoin rose from $16,000 to $40,000.

These historical phases highlight that a weakening Dollar Index often coincides with strong Bitcoin rallies. In summary, during periods of dollar weakness, investors tend to turn to Bitcoin as a hedge against fiat depreciation, reinforcing its role as a safe-haven and inflation hedge.

3. Why Has Bitcoin’s Rally Been Limited This Time?

Despite historical patterns suggesting that a weaker dollar benefits Bitcoin, its performance this time has been relatively subdued. BTCC market data shows that since early May, Bitcoin has been fluctuating widely between $100,000 and $109,000, without repeating its past explosive gains.

Key factors include:

Capital flow into gold: Recent geopolitical tensions, especially worsening conditions in the Middle East, have driven gold prices higher, attracting significant safe-haven capital.

Slower ETF inflows: According to the latest CoinShares data, as of mid-June, Bitcoin ETF inflows have slowed, down 25% compared to the previous period — signaling increased institutional caution toward Bitcoin’s short-term trajectory.

Profit-taking pressure: As Bitcoin approached its historical highs, some large holders chose to lock in gains, putting downward pressure on short-term prices.

4. Medium- to Long-Term Outlook for Bitcoin

Despite short-term weakness, Bitcoin still holds strong medium- and long-term upside potential.

· Macro environment: Expectations of Fed rate cuts are strengthening, and a globally accommodative monetary backdrop is likely to continue. According to Goldman Sachs, major central banks are expected to enter rate-cutting cycles from the second half of 2025 through early 2026, increasing fiat currency depreciation pressure — a long-term positive for Bitcoin.
· Scarcity remains unchanged: Bitcoin’s maximum supply is capped at 21 million coins, with more than 90% already issued. As issuance decreases yearly, its role as an inflation hedge becomes even stronger — keeping it attractive to institutions and long-term investors as a store of value.
· Clearer regulatory environment: The recent passage of a stablecoin regulatory bill by the U.S. Senate signals that the country’s digital asset regulation is moving into a clearer phase, which should create a more stable environment for long-term capital inflows.

5. Investment Recommendations

Considering the dollar’s trend, Bitcoin’s short-term pressures, and its long-term fundamentals, the BTCC analyst team believes Bitcoin may continue to trade sideways or experience mild corrections in the near term. Investors are advised to avoid chasing prices too aggressively and to manage positions carefully.

Looking ahead, the backdrop of a weakening dollar and expectations of sustained monetary easing should remain supportive for Bitcoin in the long term. Investors could consider gradually increasing positions during market pullbacks.

Key areas to watch:

Latest updates on Fed policy, especially the timing of the first rate cut in the second half of 2025;
Changes in Bitcoin ETF inflows, which directly reflect institutional sentiment;
Geopolitical risks and gold price trends, which may influence capital flows in the short term.

6. Final Thoughts

A persistently weaker dollar fundamentally supports Bitcoin, and historical data backs up this trend. Although short-term capital shifts and profit-taking can impact sentiment, the medium- to long-term outlook remains positive. Therefore, investors should approach the market rationally and cautiously, using volatility as an opportunity to accumulate Bitcoin gradually for steady returns.

Risk Disclaimer: This content is for reference only and does not constitute investment advice or a trading recommendation. The market carries risk — please trade with caution and manage your positions wisely.

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Look more for details: How to Trade Crypto Futures Contracts on BTCC

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