When the US dollar drops by 10%... will Bitcoin once again usher in a "bull market"?

The Fed’s dovish stance may lead to a 10% decline in the dollar… Signal for Bitcoin to strengthen?

Global asset management firm State Street warns that if the Fed cuts interest rates earlier than expected, the dollar could depreciate by as much as 10% this year. Analysis suggests that if the dollar weakens, it could once again boost the digital asset market, including Bitcoin.

According to recent information shared by State Street FX strategist Lee Ferridge at the Miami conference, if the Fed implements further monetary easing, the dollar could weaken more deeply than it is now. Ferridge considers a scenario of two rate cuts this year as the “base case,” but also states that “three rate cuts are within the realm of possibility.”

Currently, the Fed’s benchmark interest rate is between 3.50% and 3.75%. The market has priced in two rate cuts starting from June this year. However, if President Trump’s nominated next Fed chair, Kevin Woehr, is confirmed by the Senate, the likelihood of a faster rate cut scenario increases. Woehr is viewed as a market-friendly, aggressive easing advocate.

Weak dollar, an opportunity factor for Bitcoin

A declining dollar has historically created a favorable environment for risk assets like Bitcoin. The widely accepted analysis in the crypto market suggests an “inverse correlation” between the dollar index and Bitcoin prices. That is, whenever the dollar weakens, investors tend to prefer digital assets as an alternative to fiat currency.

According to Bloomberg, the dollar index recently hit a four-year low. State Street explains that narrowing interest rate differentials may lead to a surge in foreign investors’ currency hedging demand, increasing dollar selling pressure. This is also beneficial for expanding Bitcoin demand.

Past cases have repeatedly confirmed this. Whenever the dollar weakens, global liquidity supply is stimulated, leading to capital inflows into risk assets overall, which in turn increases upward pressure on Bitcoin.

Correlation is effective but not simple or direct

However, a weaker dollar does not directly mean Bitcoin will rise. Recent reports from Grayscale evaluate that Bitcoin’s trading pattern is closer to a “growth asset” rather than “digital gold,” and short-term divergence from dollar correlation may occur.

Additionally, considering variables such as profit-taking trends, investor risk appetite changes, and monetary policy expectations, Bitcoin has sometimes declined in tandem with the dollar. Caution is advised.

Ultimately, whether the upcoming June Federal Open Market Committee (FOMC) meeting will implement the first rate cut, and whether President Trump’s nominee Woehr will lead the Fed, are key variables that will determine Bitcoin’s and the overall market’s next direction.

💡 “When the dollar wavers, what do you use to defend your investment portfolio?”

Recently, with signals of monetary easing from the Fed, expectations of dollar weakening are increasing. This also means that Bitcoin and the digital asset market are approaching a critical turning point. However, relying solely on a single news event is insufficient for practical investing.

How about integrating the rise of risk assets, interest rate changes after FOMC, and on-chain market sentiment flows into your investment strategy?

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In the ‘Macro Master’ course within the 7-stage program, you will learn about global liquidity and market cycle analysis, the inverse relationship between the dollar and cryptocurrencies, and other macroeconomic frameworks.

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