Swyftx Squawk 🦜 A Shift in US Dollar Strength

Welcome back to another edition of the Squawk. 

It’s been a busier week in crypto that what we’re used to of late, but the real story isn’t just in the price action. Beneath the surface, a few important macro signals have started to shift, and I’m going to highlight these today.  

This week, we heard fresh guidance from US policymakers, with the Federal Reserve holding rates and updating its view on economic conditions. We’ll break down what that means for markets, and why it matters for crypto. 

We’ve also seen renewed commentary from the US President on the US dollar, which has slipped to levels not seen since 2022. Let’s dive into what this could mean for crypto below.

Watching & waiting  

The Federal Reserve held interest rates steady this week, keeping policy unchanged after cutting rates in December last year. While the US economy is still growing, Chair Jerome Powell acknowledged that momentum is slowing. Job growth has cooled, the labour market is stabilising, and inflation continues to ease – but as it has for the best part of this decade – it remains above the Fed’s 2% target. 

 Powell summed it up simply, noting that policy is 'not on a preset course' and that future decisions will be made meeting-by-meeting. In other words, the Fed is comfortable waiting and watching the data before making its next move. 

‘We are well positioned to determine the extent and timing of additional adjustments based on incoming data, the evolving outlook, and the balance of risks.’ Jerome Powell.  

A key theme kicking off the first FOMC meeting of 2026 was that policy is no longer actively trying to slow the economy. While the tightening (QT) phase appears to be behind us, the Fed isn’t ready to move quickly in the other direction, either.

Dollar weakness is ‘great’

Something else worth paying attention to this week is the US dollar. The Dollar Index (DXY) has slipped to levels we haven’t seen since 2022, marking a clear shift in trend following a long period of strength. For much of the past two years, a strong US dollar has acted as a headwind for global markets. A surging USD can become a vacuum for liquidity, decreasing the strength of anything valued against it. That pressure is now easing. 

This move has also drawn commentary from Donald Trump, who described the dollar’s strength as ‘great’ while once again raising concerns about US competitiveness.  

Politics aside, when we look at this shift historically, a weakening US dollar has correlated with financial conditions loosening. The implication is that investors may be rotating capital from USD and into other classes. This movement of money can support risk assets, stimulate global trade, liquidity, and remove pressure from assets priced in US dollars – but of course, does not account for potential geopolitical volatility like we’re seeing now.  

This is how these changes could impact Bitcoin. This is in no way a trigger for an immediate move higher – especially as global markets grapple a tough end to the week – but it does represent a shift in the macro backdrop. One of the key forces weighing on crypto since 2021 may be starting to fade.

Chart of the week: Crypto Total Market Cap vs US Dollar Index

This chart depicts the relationship between the US dollar strength and crypto markets over the past decade.    

Right now, the Dollar Index is back at levels last seen in 2022. Historically, periods like this have aligned with improving conditions for crypto, as global liquidity loosens and financial stress fades. 

That said, this isn’t a signal or a guarantee. Past performance doesn’t dictate what happens next. Instead, the chart provides context. A softer dollar removes a key headwind for crypto even if price takes time to respond. 

For now, it reinforces the broader theme. The macro environment is shifting, and some of the big picture pressure that’s weighed on crypto in recent years is starting to ease.  

It also highlights the potential resistance to come should we see US Dollar strength return.

We’ll be back again next week to talk all things finance. One other notable event to deal with heading into the end of the week is the potential for a continuation to the US Government Shutdown. Markets are still feeling the pinch of geopolitical uncertainty, and this may exacerbate conditions.  

This is something I would be keeping tabs on as it could impact market volatility going forward.  

Catch you next time.