The U.S. dollar is starting to weaken once again as sellers are pushing the U.S. Dollar Index (DXY) downward, which could strengthen the momentum of Bitcoin (BTC) in the near term.
Alternative assets like Bitcoin and gold are priced against the dollar. Hence, when the DXY starts to drop, it often causes BTC to rally against the dollar.
BTC/USD (orange) vs. DXY (green). Source: Tradingview
Dollar’s share of global reserves is dropping fast
According to Holger Zschaepitz, a market analyst at Welt, the U.S. dollar’s share of global reserves is rapidly declining as countries like Russia are pursuing a de-dollarization strategy and opting for gold.
When the pandemic was declared in the first quarter of 2020, the demand for the dollar increased as investors fled to cash because it is the global reserve currency.
However, due to various factors including the presidential election and the negative outlook on COVID throughout last year, the dollar struggled to outperform other currencies like the Japanese yen and the Swiss franc.