- The U.S. dollar [DXY] has now posted two consecutive days of red candlesticks, sparking speculation that it may have started to top out.
- Could this signal the start of a major shift, with Bitcoin ready to capitalize on the dollar’s decline?
The crypto market is starting the new year with a renewed sense of optimism. After a bearish close to Q4, Bitcoin’s recovery has been both steady and decisive.
But with the scars of the last crash still fresh, all eyes are clearly on key economic trends.
DXY shows signs of topping out – A hidden pattern?
A recent AMBCrypto report highlighted an interesting link between Bitcoin [BTC] and the U.S. dollar [DXY]. When the dollar index hit a low in mid-May 2016, Bitcoin began a massive rally.
By the end of 2017, BTC had surged 1200%, closing the year at $13,000.
Interestingly, this all unfolded during Trump’s first year in the White House.
Now, looking at today’s market, Bitcoin’s recent dip after the FOMC meeting lines up with the DXY hitting a two-year high of 109.
But here’s the thing: the dollar index has now posted two consecutive days of decline, with the RSI signaling it’s in an overbought state.
Source: TradingView
As the dollar weakens, investors often flock to riskier assets for higher returns. Just look at memecoins posting double-digit gains – investors are clearly chasing faster profits.
So, what does this mean for Bitcoin? The situation is starting to resemble 2016, and with Bitcoin now back at $99K, it’s looking more likely that we could see another big rally.
But the story is far from over
Yields on U.S. government debt remained steady in the first week of 2025, with the benchmark 10-year rate holding at a two-month high of 4.6%.
Normally, when yields rise, investors flock to government bonds for stable returns.
Source: Trading Economics
Interestingly, this rise in yields came just as the Fed signaled a rate cut, which raised eyebrows given their direct correlation.
As a result, an AMBCrypto analysis suggested that the FOMC’s rate cut might have been a strategic move to manipulate market expectations. Given the current economic climate, this theory doesn’t seem too far off.
Now, with interest rate hikes looking less likely in the near future, Bitcoin could have more room to breathe.
If the DXY continues to decline, it could set the stage for a bigger shift, one that brings Treasury yields closer to the 1.2% levels we saw in 2016.
If that happens, expect a flood of retail capital back into the market, potentially turning $100K into a solid support level for Bitcoin.
Read Bitcoin’s [BTC] Price Prediction 2025-26
Add to that the looming Trump inauguration in just two weeks, and 2025 could turn into a game-changing year for crypto.
But could we see BTC pushing toward $130K in Q1? With these developments unfolding, it’s starting to look like a real possibility.
