The US dollar fell to a four-year low and gold and silver were pushed deeper into record levels as Bitcoin tried to regain the $90,000 level.
Over the past day, the dollar index, which measures the greenback against major currencies, hit 95.566, its lowest level since February 2022, after President Donald Trump dismissed concerns about a decline.
Since then, the US dollar has fallen below its 14-year support level.
As a result, the current regime is forcing institutional investors to grapple with the core question of whether Bitcoin rises as part of a broader relationship trade when the world's reserve currency falls, or whether it behaves like a leveraged risk asset that is affected when market risk evaporates.
Metals and commodities rise on reflation trade, Bitcoin lags
The clearest evidence that the market is in a “lower dollar, higher hard assets” regime is in commodities.
Gold soared above $5,200 an ounce, with spot prices reaching $5,266.37 in early trading, extending year-to-date gains by more than 20%. Silver is trading above $115 an ounce and around $115.40 in the spot market.
The speed of price changes, along with the dollar's decline, created a clear macro narrative for investors who preferred old hedges over new ones.
Andre Dragosch, head of research at Bitwise Europe, said the tape is consistent with a classic reflation setup.
In a social media post, he said the recent decline in the dollar is “perfectly consistent with the rise” in precious metals and raw industrial goods. He described this as “textbook reflation in action” and argued that “Bitcoin is grossly undervalued in this context.”
The reflation framework is important because it translates dollar movements into a broader story of liquidity, growth expectations, and the opportunity cost of cash.
In a reflationary environment, investors tend to ignore short-term inflationary effects and focus on the direction of policy and whether real yields are likely to fall.
This combination could favor assets that benefit from easing financial conditions, such as commodities, cyclical stocks, and speculative markets.
However, Bitcoin currently does not exhibit the verticality seen with gold or silver. This discrepancy has become a hot topic among investors.
One explanation is market structure. Bitcoin is now deeply integrated into global macro trading through futures, options, and regulated access points.
This depth could amplify the rally when liquidity improves, but it also exposes Bitcoin to systematic risk aversion and volatility targeting.
Gold does not face the kind of reflexive liquidation dynamics associated with cryptocurrency leverage, especially in derivatives markets that can compress positioning as soon as volatility increases.
Another explanation is sequences. In previous cycles, “trading in mistrust” often appeared first in gold.
Bitcoin sometimes acts as a second-stage hedge, gaining stronger bids only after the initial wave of volatility has stabilized and investors feel comfortable holding higher-volatility alternatives.
Therefore, this delay is not necessarily a refutation of the “hard asset” thesis. This is a reminder that Bitcoin's path may be noisier than theory.
Fed uncertainty creates two weak dollar regimes
A weak dollar is not a single signal, and Bitcoin's reaction is not automatic. The forces pushing the U.S. dollar down extend beyond simple interest rate differentials, and those differentials are crucial for cryptocurrencies.
Industry experts point to a combination of investors' concerns about expected Federal Reserve rate cuts, deficit concerns, trade policy uncertainty and U.S. policy instability.
Additionally, the debate over who will replace Fed Chairman Jerome Powell when his term ends in May is also part of the macro debate, as it introduces a governance premium into interest rate forecasts.
This creates two different “weak dollar” regimes.
In a moderate regime, the dollar depreciates primarily because markets expect US policy easing and financial conditions to ease.
In such an environment, the liquidity impulse tends to push stocks, high-yield credit, and cryptocurrencies up in the same direction. Bitcoin has benefited as competition from cash yields has weakened and marginal risk capital often appears first in the most liquid crypto assets.
In a less benign regime, the dollar weakens as investors demand a larger risk premium for U.S. policy uncertainty.
Gold prices could still rise, but credit conditions could also tighten, widening spreads and triggering deleveraging.
But when that happens, Bitcoin often trades like a high-beta risk asset, making it vulnerable to the same forced selling that hits other volatile exposures.
Considering this, some macro investors argue that this move contains elements of both, which is why the tapes seem contradictory.
Dollar option positioning has become more bearish, indicating that not only interest rates but also hedging and risk repricing are part of the problem.
The drop in the dollar following President Trump's comments was interpreted by some traders as signaling tolerance for a weaker currency, with market commentary calling such tolerance a policy preference as a weaker currency could support exports while easing the path to lower interest rates.
Germany's BaFin also emphasized that the authorities are paying close attention to this change.
The regulator warned that risk markets were beginning to question the dollar's global role, but stressed that short-term risks to German banks were manageable and focused on short-term dollar refinancing vulnerabilities.
In the case of Bitcoin, this brings us back to the identity debate. A loss of confidence in the credibility of US policy could strengthen the long-term narrative against scarce non-sovereign assets.
However, confidence shocks can also increase volatility, and increased volatility often triggers investors to reduce exposure to the most liquid and risk-on parts of their portfolios.
History suggests the dollar-bitcoin relationship is conditional
There are historical examples of “weak dollar, strong bitcoin”, but this comes with a footnote.
In 2017, the dollar fell broadly and Bitcoin created a mainstream global mania for the first time, rising from about $1,000 to a peak near $19,118.
While this coincidence does not prove causation, it does show that a soft dollar backdrop can coexist with a strong crypto rally, especially in situations where speculation has paid off and real yields have not risen sharply.
In stress windows, the relationship can be reversed. In late 2020, Bitcoin experienced a sharp selloff amid widespread market turmoil related to news of the pandemic, while the dollar strengthened as investors turned to traditional safety.
The Fed's tightening cycle and strong dollar have been largely hostile to cryptocurrencies in 2022, with the dollar rallying towards multi-decade highs as growth concerns and expectations for aggressive rate hikes make cryptocurrencies more attractive as safe-haven assets.
scholar 2025 study supports the idea that the correlation is unstable. Studies using time-frequency methods argue that the association between Bitcoin and the dollar index may be transitory and period-dependent rather than a consistent inverse relationship across cycles.
That's the correct way to assemble the current tape. A weak dollar can be constructive for Bitcoin if it is accompanied by easing real interest rates and improving liquidity. Dragos and other analysts point to a reflation picture when comparing Bitcoin’s slowdown to metals and industrial commodities.
However, if investors are reassessing the credibility of US policy, a weak dollar could coincide with increased volatility and credit tightening, and in such a situation Bitcoin is more likely to be sold off first and discussed later.
For traders, the next clues are likely to come from the same places macro desks are already focused on.
If the dollar continues to weaken as real yields decline and credit spreads stabilize, Bitcoin's lag may narrow, especially if we see a recovery in risk appetite with inflows into crypto products and derivatives positioning.
However, if the dollar decline is accompanied by widening spreads, tightening funding conditions, and widespread volatility shocks, Bitcoin's role as a high-beta asset is likely to become dominant in the short term, even if the long-term story is louder.
For now, gold and silver are acting like a classic dollar hedge on the reflation tape. Meanwhile, Bitcoin is waiting in the market to decide which version of the “weak dollar” to trade.
