The watchdog says that the price of Bitcoin is linked to the performance of the US dollar, not to politics

Bitcoin's recent price surge may have less to do with speculation on the United States election and more to market expectations of a weaker US dollar.

In the year According to an analysis by crypto watchdog Copper on July 22, former US President Donald Trump's chances of winning a second term in November's election led to a price rally. However, the move may be related to “market speculation that the US dollar will lose ground against other currencies, as has historically been the case under a Republican White House.”

Bitcoin (BTC) price has increased more than 6% in the last seven days, jumping from approximately $63,500 to $68,000 on July 15.

The report notes that Bitcoin's market behavior often mirrors that of other major currencies, which rally when the US Dollar Index (DXY) declines. This trend was observed in 2017 and 2021 when BTC reached a high as the dollar weakened.

Since 1969, during periods when a Republican president has been in office, the US dollar has depreciated by an average of 10% – indicating a weaker US dollar relative to other major currencies. On the other hand, the dollar has appreciated by an average of 8 percent since 1969 when a Democratic president was in office.

“Bitcoin dynamics are complex with a tendency to move in the opposite direction to the strength or weakness of the US dollar. Additionally, any management that delivers growth could see investors return to the volatile asset class, said Fadi Abulfa, head of copper research.

According to Copper's analysis, what matters is not the absolute strength of the DXY, but rather market expectations about its future performance:

“If markets continue to expect a Republican victory this year, there may be speculation that the US dollar could weaken, especially as it is currently trading at its highest level since 2002.”

DXY performance

In the year Between 2013 and 2016, during the Democratic administration of President Barack Obama, the DXY grew by 25 percent. This increase may be due to several factors. The economic recovery following the 2008 financial crisis, overall improved economic conditions in the US compared to other major economies, and the expectation that the Federal Reserve will eventually start raising interest rates.

Conversely, between 2017 and 2020, under Republican Donald Trump's administration, the DXY declined by 7 percent. This period saw significant tax cuts, which initially boosted economic growth, but raised concerns about rising budget deficits. Trade tensions and tariffs imposed on other countries also contributed to the dollar's volatility.

Since 2021, under the Biden administration, DXY has increased by 14%, according to Copper Analysis. Factors such as higher inflation expectations, the Federal Reserve's actions to raise interest rates and global uncertainty have contributed to the greenback's growth over the past few years.

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