This year’s start has surprised many investors with the dollar’s performance.

At the beginning of the year, major investment banks repeatedly emphasized the dollar’s strong position, only for reality to deliver a loud slap. Entering 2025, the US dollar index has fallen by over 10%, with almost all major currencies appreciating against the dollar. This is not just simple volatility but a significant adjustment in the foreign exchange market.

The question is—why is this happening?

There are two obvious drivers on the surface. First, the Federal Reserve’s interest rate cut cycle. When yields on dollar assets decline, international capital naturally seeks other avenues, leading to a continuous outflow of dollar funds. Second, uncertainties caused by changes in trade policies. Worries about economic prospects have intensified, making international hot money more cautious, further weakening demand for the dollar.

But is this really just a coincidence? Some believe that the dollar’s depreciation may not be entirely accidental but part of a certain policy framework. From the perspective of exporters, a weaker dollar is indeed beneficial—goods become relatively cheaper, increasing orders. Multinational corporations with extensive overseas operations also see exchange gains grow. This directly helps the US trade balance.

But at what cost? Who will ultimately bear the burden?

It’s usually other regions around the world. A weaker dollar means higher prices for imported goods, increasing inflationary pressures from imports. A deeper logic is that some analysts see this as a modern reinterpretation of the 1985 Plaza Accord—when the US, allied with other countries, pushed down the dollar to address trade deficits; now, it’s unilateral actions attempting to make the global economy bear the costs of adjustment.

There’s also a deeper layer: the US national debt has exceeded trillion dollars and continues to grow. Using currency depreciation to dilute debt value effectively shifts the burden onto global creditors. While this logic sounds somewhat radical, history shows there are precedents.

What does this mean for the crypto market?

When dollar depreciation expectations strengthen, investors typically seek alternative assets. Cryptocurrencies like Bitcoin and Ethereum, due to their relatively fixed supply, are often viewed as hedges against inflation and currency devaluation. A weaker dollar also tends to boost dollar-denominated commodities and risk assets.

Another perspective is that the Federal Reserve’s rate cut cycle may continue—low interest environments encourage yield-seeking capital to take on more risk, which is beneficial for liquidity in the entire crypto ecosystem.

Looking ahead to 2026, several questions are worth pondering: Will the dollar continue to decline or rebound? Will the global economy fall into stagflation or experience a soft landing? These seemingly macro events are not distant topics for those holding digital assets or planning to allocate crypto positions—they directly influence asset allocation strategies and timing.

What are your thoughts on this dollar weakening cycle? Have you adjusted your positions in the crypto market? Feel free to share your views.