Strongly Negative Bets on the Dollar

Bets on the US dollar have reached lows not seen in 14 years. 

This is what the Wall Street Journal reports, citing a survey on exchange rate sentiment by Bank of America (BoA). 

Despite this, there are also elements suggesting an imminent end to the bearish trend. 

The Rising Trend

The all-time low of the Dollar Index was reached in April 2008, eighteen years ago, when it fell below 72 points for the first time in history during the financial crisis. 

However, starting from 2011, it began to rise, so much so that over the past 18 years, it has indeed moved within an upward trend. 

This trend initially pushed it back above 80 points, and then in 2014 even above 90. 

The peak of this trend was reached in 2022 above 114 points, although still far from the previous all-time high of 126. 

After returning to a perfect neutral zone, around 100 points, in 2023, it marked another local peak in January 2025 slightly above 110 points, but since then it has entered a downward trend. 

The Downward Trend

Currently, there are two opposing trends in place: a long-term upward trend that has lasted for 18 years, and a medium-term downward trend that has been ongoing for just over 12 months. 

The lower level of the long-term upward trend is currently positioned around 97 points, which is approximately the current value of the Dollar Index.

To be honest, at the end of January, it had reached a local minimum peak even below 96, but then it immediately bounced back. 

The key point, however, is that the average level of the medium-term bearish trend is currently around 95 points. Therefore, if this bearish trend continues, it seems very likely that the long-term bullish trend will have to come to a halt. 

The Forecasts

However, there are conflicting forecasts on this matter. 

As reported by the Wall Street Journal, the short positioning on the dollar is at its highest levels since January 2012. Furthermore, the Bank of America survey shows that fund managers’ exposure to the dollar in February has fallen below the lows of April 2025. 

However, it is always essential to clearly distinguish medium-term trends from long-term ones. 

Indeed, it is generally considered quite likely that the downward trend could continue in the medium term, or even in the short term, but it is on the long-term trend that opinions are divided. 

Short positions might indeed be primarily concentrated on the short or medium term, while in the long term the situation could be different. 

In a similar situation in 2018, the Dollar Index remained at low levels until May, but then started to rise from June, also because a strengthening dollar can be advantageous during the mid-term election campaign. 

The Doubts

WSJ reports that concerns about the Fed’s independence have actually eased somewhat following the appointment of Kevin Warsh as the new chairman, but this has not translated into increased demand for dollars nor renewed optimism for U.S. assets. 

It also adds that respondents from BoA see further signs of weakness in the U.S. labor market as the main risk for a weaker dollar. 

However, the biggest concern is the impact on the foreign trade balance. 

In the last 18 years, partly due to a strengthening dollar, the US trade balance with foreign countries has continued to deteriorate, with increasing import and export struggles. 

During 2025, the medium-term downward trend helped recover part of this balance, with exports slightly increasing while imports, also due to Trump’s tariffs, decreased. 

At this point, however, one must wonder whether it is more advantageous for the USA to have a dollar that continues to weaken, to boost exports, or a dollar that starts to rise again, to reduce inflation particularly on imported goods. 

This raises many doubts about the future, especially because, due to Trump’s tariffs, Japan and the EU, along with China, do not look favorably upon a weak dollar. 

The Impact on Crypto

In theory, the more the dollar weakens, the more its real value decreases (i.e., purchasing power), and this should favor assets like Bitcoin that heavily depend on the dollar’s real value. 

The issue is that since October, the inverse correlation between DXY and BTCUSD has broken down, due to the minor liquidity crisis caused by the shutdown. 

This crisis is technically still ongoing, although being small, it is somewhat difficult to recognize since it has little impact on other assets (it is primarily Bitcoin that depends on liquidity). 

As long as the minor liquidity crisis, caused by nearly a trillion dollars drained from the market by the US government, continues to hold back the price of Bitcoin, it is difficult to imagine that a low Dollar Index could benefit the crypto markets.

However, if at some point the US government were to decide to reintroduce large sums into circulation—at least one hundred or two hundred billion dollars—then a weak dollar could indeed have positive effects on Bitcoin prices, and consequently on the entire crypto market.