DXY, which measures the dollar’s value against a basket of six major currencies, has been under pressure recently. The dollar’s worst annual performance since 2017 and a weak start to the year have unsettled markets. As it happens, this isn’t the only story—safe-haven assets like gold and silver are hitting new record highs.

Analyst Adam Kobeissi noted:

“If the dollar closes in the red this year, it would mark its first consecutive annual loss since 2006-2007. Look closely, and movements in gold and silver reveal fiat currency depreciation very clearly.”

Fortunately, the latest decline is linked to potential yen intervention. Reuters reported that the New York Fed conducted rate checks as a signal of possible coordinated action with Japan. This pushed the yen to a two-month high and weighed on the dollar.

Investors are also cautious ahead of the upcoming Fed meeting and a potential announcement from President Trump regarding Jerome Powell’s successor. Truthfully, despite Trump’s repeated calls for aggressive rate cuts, markets are not expecting an imminent policy shift. Data from the CME FedWatch Tool shows the probability of a 25 basis point cut at just 2.8%.

Analysts Warn of Further DXY Weakness

This market tension is prompting analysts to warn of additional downside risks. Rashad Hajiyev notes that the upcoming FOMC meeting could trigger a breach of the index’s 18-year support level:
“DXY could head to 85 first, then 75. At that point, dollar selling may fuel gains in gold and silver.”

Ted Pillows points out a descending triangle pattern on the DXY chart. Technically, this formation signals continued bearish momentum, raising concerns of a deeper decline.

How Could Bitcoin Be Affected?

Bitcoin and DXY have historically shown an inverse correlation, closely watched by market participants. As the dollar weakens, investors tend to shift toward riskier assets. Of course, this creates upward potential for Bitcoin prices.

Yen strength and dollar weakness could create short-term risks. Bitcoin’s correlation with the Japanese yen is near record highs. If yen intervention occurs, short-term risks may arise, but long-term dollar weakness could benefit Bitcoin. Analyst Donny notes that if DXY falls below 96.2, the effects may be seen around April or May 2026:

“BTC can still move upward, and I believe it will. The DXY decline, combined with MSTR, supports a mean reversion move. If the 96.2 support breaks, we could see significant upward movement in the first half of the year. Once BTC surpasses 107.4K and MSTR 231, dollar weakness will push targets significantly higher,” Donny added.

In short, the next few weeks may determine both the dollar’s direction and the trajectory of the crypto market. Essentially, market participants are hedging risk while chasing opportunities, which could translate into upward momentum for Bitcoin.

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Trump Says Bitcoin Is Good for the Economy

Speaking at a White House press conference, Trump emphasized that the growing Bitcoin industry brings undeniable economic benefits. “It’s become amazing,” he said. “It’s the jobs that it produces, and I notice more and more you pay in Bitcoin. People are saying it takes a lot of pressure off the dollar, and it is a great thing for our country.”

You Might Be Interested In: Elon Musk Talks About the Name of a New Memecoin!

Analysts suggest that Trump may have been alluding to the Triffin Dilemma — the conflict between the short-term domestic goals and the long-term global role of the dollar as the world’s reserve currency.

National Debt, Inflation, and the Bitcoin Hedge

Trump previously floated the idea of paying off the national debt using Bitcoin, highlighting its capped supply in contrast to the inflationary dollar. However, critics argue that even owning all the Bitcoin in circulation would not be enough to offset the U.S.’s $37 trillion debt.

The Federal Reserve’s M2 money supply continues to rise, increasing inflation risk and eroding the dollar’s purchasing power. Meanwhile, the U.S. Dollar Index (DXY) has fallen to a three-year low, reflecting diminishing investor confidence in the dollar’s stability.

“Nothing Stops This Train”

Macroeconomist and Bitcoin advocate Lyn Alden has coined the phrase “nothing stops this train,” referring to the inevitable continuation of money printing by global governments — a process that only strengthens the case for decentralized, limited-supply digital assets like Bitcoin.

Trump’s comments may signal a shift in how the U.S. government views cryptocurrencies — not as a threat, but as a strategic economic asset.

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The Federal Reserve is anticipated to soften its stance, given recent declines in inflation rates and a slowing economic growth pace. Economists believe a rate cut is highly probable, alongside forward-looking signals in the decision statement and Jerome Powell’s press conference. These cues are expected to guide market sentiment and asset prices.

Impact on Crypto and Stocks

A rate cut could create a favorable environment for risk assets. Bitcoin (BTC) and other altcoins might enter a bullish phase, while NASDAQ and S&P 500 indices could also see positive movements. However, a surprise decision or tighter policy tone could lead to heightened market volatility.

Dollar and Gold Outlook

Lower interest rates generally weaken the dollar, while supporting gold prices. As a result, the DXY index might move downward, and gold could rise following a rate cut decision.

Why Is This Decision Crucial?

This meeting is significant not just for the interest rate decision but also for the FED’s projections for 2025 and Jerome Powell’s remarks. Powell’s focus is expected to include:

• Inflation and employment market data
• Forward guidance on interest rate policies
• Global economic risks

What Could Be the Outcome?

The decision, expected at 10:00 PM UTC, will have a major impact on global markets. If the anticipated rate cut occurs, risk assets could rally. Conversely, any deviation from market expectations could increase volatility.

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