Dollar's Post-Election Trends Reflect Trump's Initial Term Patterns

Overview

The DXY index has increased by over 3% following the recent U.S. presidential election, mimicking trends noticed during Trump's first term. This significant shift raises concerns about the implications for cryptocurrencies like Bitcoin.

Key Highlights

Both the dollar and Bitcoin experienced upticks following the presidential election.
The dollar's current rally is in line with the patterns observed after Trump's previous victory in 2016.
If the dollar continues to strengthen, it might negatively impact Bitcoin's growth in the near future.

Historical Context

Since President-elect Trump secured his victory two months ago, the dollar has appreciated over 3% against other currencies, mirroring its behavior after his 2016 election.

In past cycles, the DXY Index peaked before tapering off, which aligned with Bitcoin's surge in 2017. The current scenario, however, seems different as the index maintains a strong performance without indications of declining. Trump's policies and the Federal Reserve's anticipated actions may sustain this growth.

US Dollar Index Analysis US Dollar Index 2016-2017 versus 2024-2025: (Investing.Com)

Investor Perspectives

Despite a strong dollar typically signaling challenges for riskier assets, Trump has indicated support for cryptocurrencies like Bitcoin. According to Bitwise's Andre Dragosch, Bitcoin has increased notably post-elections and might not sustain that momentum at the same rate. As of now, Bitcoin trades approximately 10% below its peak of around $108,300.

Quote from Andre Dragosch:
"The Federal Reserve currently faces a dilemma: either risk a U.S. recession by delaying crucial actions or trigger higher inflation."

Moreover, Trump aims to impose tariffs on significant trading partners, which could fuel global uncertainty and enhance demand for the dollar as a safe haven in volatile times.

The U.S. economy also exhibits robust performance compared to others, with a GDP growth exceeding 3% and inflation higher than targeted thresholds, resulting in elevated federal funds rates with few anticipated interest rate reductions in 2025.

Dragosch further remarks that the Fed has signaled only two rate cuts for 2025, much less than earlier expectations, contributing to the dollar's strength while commencing downward pressure on Bitcoin.