The Cycle Repeats: How a Weakening Dollar Could Boost Bitcoin in 2025

Why a falling US dollar might fuel Bitcoin’s next rally based on historical trends and interest rate shifts

Bitcoin investors watch the US dollar closely — and for good reason. Bitcoin is priced in dollars across nearly all global exchanges. When the dollar weakens, Bitcoin becomes cheaper for buyers using other currencies, often sparking demand and price gains. This article unpacks how 2025’s dollar decline and Federal Reserve interest rate cuts set the stage for what could be a major Bitcoin rally. You’ll learn key data points, historical context, and what this means in real dollars for Bitcoin prices ahead.

How a Weaker Dollar Typically Boosts Bitcoin

Bitcoin’s price moves inversely with the US dollar for a straightforward economic reason: it’s dollar-denominated worldwide. When the dollar drops, Bitcoin’s relative value rises for international buyers who need fewer of their own currency units to buy a Bitcoin.

Historically, this relationship holds strong. Charting Bitcoin returns against six-month dollar performance breaks the data into five groups based on dollar strength or weakness:

When the dollar was at its weakest, Bitcoin soared nearly 190% in six months. Even moderate dollar drops saw Bitcoin return around 40% gains. This means if the dollar continues weakening in 2025 — currently down about 12%, potentially its worst year since the 1970s — Bitcoin could realistically see a 40% to 190% price upswing. That would translate to prices between roughly $150,000 and $210,000 per Bitcoin.

Data callout: The dollar has fallen 12% in 2025, one of its steepest annual drops in decades, laying a strong foundation for Bitcoin’s price appreciation.

Interest Rates’ Role in Dollar and Bitcoin Dynamics

The US Federal Reserve’s interest rate policy heavily influences the dollar’s strength. Here’s why:

• When the Fed hikes rates, US assets yield more interest, attracting global capital and strengthening the dollar.
• Conversely, rate cuts reduce returns on dollar assets like Treasury bonds, diminishing foreign demand for dollars, causing it to weaken.

From mid-2022 to mid-2023, the Fed aggressively raised rates to combat inflation, strengthening the dollar and pressuring Bitcoin prices downward. Since late 2023, the Fed has stabilized rates and began cutting them starting September 2024. February 2025 saw another 25 basis point cut, with more cuts expected this year.

This interest rate easing is likely to continue putting downward pressure on the dollar in 2025, which could make Bitcoin more attractive to international investors and create a supportive price environment.

Answer Box: Why Does a Weaker Dollar Usually Help Bitcoin?

Bitcoin is priced in US dollars worldwide, so when the dollar loses value, Bitcoin becomes cheaper for international buyers. This increased demand from foreign investors tends to push Bitcoin’s price higher during periods of dollar weakness.

Risks and What Could Go Wrong

• Fed policy surprises: If inflation rises unexpectedly, the Fed could pause or reverse rate cuts, strengthening the dollar and pressuring Bitcoin.
• Regulatory changes: Increased regulation or crackdowns on crypto markets could dampen Bitcoin demand regardless of dollar trends.
• Global capital flows: Geopolitical events can shift investor flows unpredictably, altering the dollar-Bitcoin dynamics.
• Bitcoin’s volatility: Even favorable macro factors may not prevent abrupt Bitcoin corrections or sideways trading.

Investors should monitor these risk factors alongside macro data.

Summary: What Investors Should Remember

• A historically strong inverse correlation exists between the US dollar and Bitcoin prices.
• The US dollar is down ~12% in 2025, often signaling a bullish Bitcoin setup.
• Fed rate cuts reduce dollar yield, leading to currency weakness supportive of Bitcoin gains.
• Based on past cycles, Bitcoin could rise between 40% to 190% if the dollar continues dropping.
• Risks include sudden Fed policy changes and crypto-specific regulatory challenges.

Interested in more real-time signals on Bitcoin price drivers? Get the full playbook and entries in today’s Wolfy Wealth PRO brief, featuring deeper macro analysis, alerts, and risk management strategies.

FAQ

Q: How much could Bitcoin rise if the dollar weakens further?
A: Based on historical data, Bitcoin could gain 40% to 190%, potentially reaching $150,000 to $210,000 per coin.

Q: Why do Fed interest rate cuts tend to weaken the dollar?
A: Rate cuts lower returns on dollar-based assets, reducing international demand for dollars, causing its value to drop.

Q: Has Bitcoin always rallied when the dollar fell?
A: While not perfect, most major dollar declines since Bitcoin’s inception have coincided with strong Bitcoin rallies.

Q: What could disrupt the dollar-Bitcoin inverse relationship?
A: Unexpected Fed actions, regulatory changes, or global economic shocks could change these dynamics.

Q: How can investors track these trends?
A: Following US dollar indices, Federal Reserve announcements, and Bitcoin macro data offers crucial signals for timing.

Disclaimer: This article does not constitute financial advice. Cryptocurrency investments carry risks and can be highly volatile. Always do your own research and consider your risk tolerance before investing.

By Wolfy Wealth - Empowering crypto investors since 2016

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Disclosure: Authors may be crypto investors mentioned in this newsletter. Wolfy Wealth Crypto newsletter, does not represent an offer to trade securities or other financial instruments. Our analyses, information and investment strategies are for informational purposes only, in order to spread knowledge about the crypto market. Any investments in variable income may cause partial or total loss of the capital used. Therefore, the recipient of this newsletter should always develop their own analyses and investment strategies. In addition, any investment decisions should be based on the investor's risk profile