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The dollar benefits as investors turn away from cryptocurrencies and gold, and there could be further gains ahead.
Bitcoin and gold prices are under pressure and the dollar is rising: the debasement trade of 2025 is being questioned, and that opens the door to further USD gains say analysts we follow.
"There could be further unwinding of last year's popular dollar de-basement trade idea, where expectations of a compromised Fed had led to demand for gold, bitcoin and the Swiss franc," says Chris Turner, head of FX analysis at ING Bank.
The dollar index - a measure of broader USD performance - is up 0.40% on the week and bitcoin is down 8.0%, reaching $66,339 by midweek.
The 'debasement trade' describes how the dollar is expected to erode in value due to persistent fiscal deficits and accommodative Federal Reserve policy. Scarce assets such as bitcoin and gold are seen as alternatives; they rose during 2025 and through early 2026 as the dollar fell in value.
But, spot Bitcoin ETFs have experienced one of their largest sustained outflow streaks on record, while Ethereum ETFs have also seen fresh withdrawals.
"Bitcoin’s price action reflects a sharp reset in crypto risk appetite, with the market reacting to broken support levels, institutional outflows, weaker ETF demand, and heavy derivatives liquidations," says Naeem Aslam, CIO at Zaye Capital Markets.
Gold prices are down 1.75% this week to $4461; the high was $5400, reached in early March.
ING's Smith says with the debasement trade under some pressure, "the dollar might have further room to rally."
The dollar still benefits from reserve currency status, deep capital markets, superior growth and high real yields.
Recently, it's picked up fundamental support as the market comes around to the view that the Federal Reserve will respond to rising inflationary pressures by raising interest rates; "we can see the dollar winning a few friends on the view that the Fed may have to tighten after all," says Smith.
"Gold and bitcoin certainly have not performed as well as expected through this year's inflation shock, and a more hawkish Fed over the coming months could well be played out via a higher USD/CHF. We favour DXY to test the top of the short-term trading range at 99.50/55 – assuming ADP and ISM data perform," he adds.
