US Dollar’s Worst Year Since 1973 Becomes the Catalyst for Bitcoin’s Rise

• US Dollar Index (DXY) has plunged about 10.8% in the first half of 2025
• Rising US debt, trade policy instability, and a less independent Fed are eroding the dollar’s dominance
• When the Fed signaled a dovish pivot in 2020, Bitcoin rallied from approximately $10k to about $60k in under a year

The US Dollar Index (DXY) has plunged about 10.8% in the first half of 2025, marking its worst start to a year since 1973.

This historic weakness is being driven by a combination of political uncertainty and eroding confidence in U.S. fiscal policy, a dynamic that is creating a powerful tailwind for hard assets like gold and Bitcoin.

Factors Driving the Dollar’s Decline

There are several factors contributing to this development, with political doubt being one of them. For instance, markets are worried about renewed Trump-era tariffs and ballooning deficits, in addition to constant pressure from Trump’s administration on the Fed to introduce rate cuts.

There’s also the fact that some investors are shifting from the dollar to safe-haven assets like gold and bonds from Europe and Asia. Interestingly enough, despite the dollar’s decline, US equities and Treasuries have remained strong.

Still, rising US debt, trade policy instability, and a less independent Fed are eroding the dollar’s dominance.

How does a weakening dollar benefit Bitcoin and crypto?

That being said, this is actually good news for the crypto industry since a weakening dollar makes Bitcoin and other cryptocurrencies more attractive as a store of value or inflation hedge.

As global investors reduce dollar exposure, some are rotating into alternative assets such as crypto, and this shift in global capital flows could strengthen Bitcoin and gold, which are both seen as non-sovereign assets.

Speaking of gold, it has surged alongside the dollar’s drop, climbing above $3,300/oz, supported by safe-haven demand and crypto’s rise.

A potential bullish run

Due to the weakening US dollar, numerous crypto enthusiasts are hoping for a bullish Bitcoin and crypto in general. 

If confidence in the dollar’s long-term purchasing power erodes, crypto becomes part of a portfolio hedge strategy. Corporations have already set their eyes on Bitcoin, seeing as about 130 publicly traded companies now hold a combined $87 billion in Bitcoin.

Then, countries such as El Salvador, Bhutan, and Kazakhstan are adopting Bitcoin reserves.

All of this is helping crypto in the long run, even the loose Fed policies. For example, when the Fed signaled a dovish pivot in 2020, Bitcoin rallied from approximately $10k to about $60k in under a year.

Nonetheless, it’s important to remember that not all dollar weakness leads to a crypto surge. Any crypto regulation crackdowns can slow this momentum, and any geopolitical or similar crisis can put a dent in the crypto industry. In situations like those, even a weaker dollar will likely be preferred over volatile assets.