A sharp drop in the US Dollar Index could set the stage for a Bitcoin price rally, according to Jamie Coutts, Chief Crypto Analyst at Real Vision.
In a Mar. 7 post on X, Coutts cited historical evidence that indicates notable declines in the DXY frequently align with large uptrends in Bitcoin (BTC). He conducted a backtest on cases in which the DXY dropped more than 2% and discovered that Bitcoin had an average gain of 31.6% and a 94% win rate over the next 90 days.
In addition, Bitcoin posted gains 100% of the time, averaging 37% return, when the DXY fell more than 2.5 percent. Coutts believes Bitcoin will reach a new all-time high by May based on these trends.
The DXY is frequently regarded as an inverse signal for risky assets like Bitcoin since it measures the value of the US dollar against a basket of major currencies. Investors often turn to alternative stores of value, such as Bitcoin, when the dollar weakens.
The recent decline in the DXY coincides with market turbulence, which has been fuelled by Trump’s tariffs on Canada and Mexico, together with his administration’s renewed push for a national crypto strategic reserve and clearer regulations. At the same time, the upcoming Crypto Summit has boosted speculations in the industry.
After recent market turbulence, Bitcoin is trading around $87,800, down 4% in the past 24 hours as at the time of press. But the trajectory of altcoins remains mixed. Although there has been some recovery in solid projects, the market as a whole is still suffering from heavy sell-offs.
According to Coutts, the 365-day new lows in the Top 200 crypto index reached 47%, a signal of capitulation typically seen before bullish reversals. If historical trends hold, a declining dollar and growing institutional confidence may be driving Bitcoin and altcoins into a period of sustained gains.
Given the uncertainty surrounding the Federal Reserve’s next actions, macroeconomic issues may have an even greater impact on the direction of the market in the short term.
