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The Fourth Largest Weekly Drop in Dollar Index in Over a Decade Signals Bitcoin Bottom
One of the largest weekly DXY index drops since 2013 tends to align with bitcoin cycle lows.
What to know:
- Fourth occurrence of a -4 standard deviation drop in the DXY Index since 2013, a rare event historically linked to bitcoin bottoms.
- Previous instances in 2015, 2020, and 2022 led to significant bitcoin rebounds following the drop.
The DXY Index, has experienced one of its sharpest one-week declines since 2013. The index measures the strength of the U.S. dollar against a basket of major currencies.
According to Bloomberg data from Global Macro Investor, the index’s one-week percentage drop has exceeded a negative four standard deviation move—a rare event that has only occurred three other times in bitcoin's (BTC) history.
STORY CONTINUES BELOW
These previous occurrences include November 2022, when bitcoin hit its cycle low of $15,500 during the FTX collapse; March 2020, amid the covid 19 pandemic, when bitcoin briefly fell below $5,000; and the 2015 bear market, when bitcoin traded around $250. Each time the DXY Index suffered a drop larger than a -4 standard deviation, it coincided with a bitcoin bottom, followed by significant price gains.
Additionally, CoinDesk research highlights that the DXY Index is currently declining at a faster rate than in President Trump's first term— a period that aligned with the 2017 bitcoin bull run. A decline in the DXY Index tends to be favourable for risk-assets, however a DXY index above 100, is still considered strong, currently at 103.8.
James Van Straten
James Van Straten is a Senior Analyst at CoinDesk, specializing in Bitcoin and its interplay with the macroeconomic environment. Previously, James worked as a Research Analyst at Saidler & Co., a Swiss hedge fund, where he developed expertise in on-chain analytics. His work focuses on monitoring flows to analyze Bitcoin's role within the broader financial system. In addition to his professional endeavors, James serves as an advisor to Coinsilium, a UK publicly traded company, where he provides guidance on their Bitcoin treasury strategy. He also holds investments in Bitcoin, MicroStrategy (MSTR), and Semler Scientific (SMLR).
