Bitcoin is bouncing back after a sharp decline, and a weakening U.S. dollar may be setting the stage for a bigger move. The U.S. Dollar Index (DXY) just posted one of its biggest weekly drops in over a decade, and history suggests that this kind of plunge often signals a Bitcoin bottom. According to Global Macro Investor, the DXY’s one-week percentage drop exceeded a negative four standard deviation move—an event that has only happened three other times since 2013. Each time, Bitcoin rebounded significantly.
DXY Decline Often Marks Bitcoin Bottoms
Previous instances of such sharp dollar declines occurred in 2015, 2020, and 2022—each aligning with a major Bitcoin price recovery. In November 2022, Bitcoin hit a cycle low of $15,500 during the FTX collapse. In March 2020, it briefly fell below $5,000 amid COVID-19 market chaos. And in the 2015 bear market, Bitcoin was trading around $250 before rallying. A weaker dollar often benefits risk assets, and with the DXY currently at 103.8, some analysts see an opportunity for Bitcoin’s next leg higher.
Bitcoin Bounces 4% after Strategic Reserve “Sell the News” Drop
Bitcoin initially dropped following President Donald Trump’s announcement of the U.S. Strategic Bitcoin Reserve, a move that disappointed traders hoping for fresh government Bitcoin purchases. Instead, the reserve will only hold confiscated Bitcoin, which triggered a “sell the news” reaction. However, Bitcoin has since rebounded by 4% as market sentiment improves ahead of the White House Crypto Summit.
The combination of a declining U.S. dollar, historical patterns, and improving sentiment suggests Bitcoin may be gearing up for another move higher. Traders are now watching key resistance levels, with some analysts predicting Bitcoin could range between $85,000 and $95,000 before making another run at new highs.
At the time of writing, Bitcoin is sitting at $88,518.45.
