The U.S. dollar index (DXY) has continued its downward trajectory, trading just above its 2025 low on Tuesday. Following a strong surge in value after the November 2024 election of Donald Trump, the dollar has faced a notable decline throughout the first half of 2025. In recent months, it has maintained a volatile pattern close to multi-year low levels.
Initially, this sharp decline was echoed by a broader market reaction. Stocks and alternative assets saw significant gains, with gold, silver, and copper all climbing to new record highs. However, since October, the narrative has shifted; while stocks and hard assets continue their upward momentum, bitcoin and the wider cryptocurrency market have suffered considerable losses, entering a brutal bear market.
Currently, the DXY index is perched just above a critical long-term support level that dates back to the 2008 global financial crisis. This support level has been tested multiple times, most recently in July and September, proving resilient so far.
As the Federal Reserve faces increased pressure, particularly from President Trump, to lower interest rates, other foreign central banks, such as the Bank of Japan, are moving toward tighter monetary policies. This divergence in approaches raises concerns that the dollar may slip below this essential support level.
The potential breach of this long-term support could indeed have significant implications. While the weakened dollar has yet to provide a positive catalyst for bitcoin, a move below this support level might be the turning point needed to reverse the current downtrend in the cryptocurrency market. Investors are closely watching these developments, anticipating how the interplay between U.S. monetary policy and global market trends will unfold in the coming weeks.
