According to Van Straten, the Dollar’s Path After the Election Follows a Pattern Seen During Trump’s First Term.

Dollar Climbs Over 3% Post-Election, Reflecting Patterns from Trump’s First Term

Since Donald Trump secured his election victory two months ago, the U.S. dollar has appreciated by more than 3%, following a path similar to his first presidential term. The DXY Index, which tracks the dollar against a basket of the U.S.’s major trading partners, surged in December following Trump’s win in 2016, before retreating in the subsequent year, coinciding with the 2017 bitcoin bull run.

This time, however, the outlook may differ. The DXY has continued to rise, showing no indication of losing momentum. Analysts attribute this to Trump’s economic policies and the Federal Reserve’s decisions, which are expected to support the dollar’s ongoing rally.

While a stronger dollar tends to be negative for risk assets, Trump’s public endorsement of bitcoin has helped the cryptocurrency surge since the election. Bitcoin recently reached new all-time highs, though it currently sits about 10% below its mid-December peak of approximately $108,300. Andre Dragosch, Head of Research at Bitwise in Europe, suggests that while bitcoin’s rally might not continue at the same pace, the outlook remains positive.

“The Federal Reserve is facing a difficult situation right now,” Dragosch said in an interview on X. “They risk either pushing the U.S. into recession with delayed action or triggering higher inflation again with too little intervention.”

Trump’s promise to impose tariffs on major trading partners could amplify global geopolitical risks, driving greater demand for the dollar, which is often seen as a safe-haven currency in uncertain times.

The U.S. economy is also performing strongly compared to global markets, with GDP growing at over 3% and inflation surpassing targeted levels. As a result, the Federal Reserve has kept rates elevated, with only two rate cuts expected in 2025.

“Markets have adjusted to the Fed’s outlook of only two rate cuts in 2025, which is much lower than prior expectations,” Dragosch explained. “This hawkish stance has supported the dollar, driven yields higher, and contributed to the pressure on bitcoin. Right now, the macroeconomic environment is a significant headwind for the cryptocurrency.”