Markets experienced volatility this week as de-dollarisation trend continued , with investors remaining cautious about holding US assets. With ongoing global trade tensions, market participants are awaiting updates on US-China trade talks and potential crypto regulations.
Macro: De-dollarisation and Trade Dynamics
The trend of de-dollarisation, which gained momentum two weeks ago, remains intact as multiple countries explore alternatives to the US dollar in international trade. Contributing to this shift, recent rumours that President Trump may remove Federal Reserve Chairman Jerome Powell raised concerns about the Fed’s independence, leading to a sharp drop in the US Dollar Index (DXY) on Monday. While Trump swiftly denied these rumours, reaffirming the Fed’s autonomy, China has signalled a potential easing of trade tensions by weighing exemptions for some US goods from its 145% tariffs.
Meanwhile, China’s Politburo recently pledged support for companies and workers affected by tariffs, including measures like easing monetary policy and cutting interest rates to stimulate economy. Despite stronger-than-expected growth in Q1 2025, concerns remain about the prolonged trade conflict and its economic impact.
The US Dollar Index (DXY) recently dipped to approximately 98.32, its lowest point since April 2022. This decline reflects the aforementioned growing concerns about US trade policies and the Federal Reserve’s actions. Key technical levels to monitor include the support around 97.92 and resistance near 100.21. A sustained move below 98 could signal further weakening, while a rebound above 100 may suggest renewed strength. In response to these challenges, the US Federal Reserve has maintained a cautious, wait-and-see approach, signalling a dovish stance on economic developments and expressing concerns about the potential negative impact of trade uncertainties on growth.
Crypto: Divergence in ETF Flows
In the cryptocurrency market, a clear divergence is emerging in institutional flows. Bitcoin continues to attract substantial interest, with a remarkable USD 2.65 billion in ETF inflows, reinforcing its dominance and stability. In contrast, Ethereum saw only modest net inflows, underscoring a shift in investor preference. This trend is highlighting the growing strength of bitcoin relative to other cryptocurrencies. Despite Ethereum’s brief recovery, investor focus is clearly skewed towards bitcoin, reflecting its superior appeal and market structure in the current environment.
As risk-off sentiment stabilised and equities rebounded from the recent sell-off, bitcoin acted as a high-beta asset, demonstrating its relative strength in various market conditions. Holding firm above USD 80,000, bitcoin’s price stability reflects its resilience and increasing role as a safe haven in a market characterised by financial repression. This performance highlights bitcoin’s ability to maintain its position and outperform amid broader market volatility.
In terms of broader market sentiment, newly appointed SEC Chairman Paul Atkins’ recent remarks at a conference emphasised the importance of a clear regulatory framework for digital assets. This statement signals the potential for a more favourable regulatory environment for cryptocurrencies, which could encourage further institutional participation. As the regulatory landscape becomes clearer, it may bolster confidence and attract greater long-term capital flows into the cryptocurrency market.
Looking Ahead: Trade Developments and Crypto’s Response
Looking ahead, market participants will closely monitor developments in US-China trade negotiations. The International Monetary Fund (IMF) has urged global leaders to resolve the escalating trade tensions, warning of potential global economic instability. Prolonged uncertainties could weigh on investor sentiment and market stability.
In the cryptocurrency space, a stabilisation of macroeconomic tensions could renew investor confidence. A clearer regulatory framework and improved market conditions may support further growth in digital assets.
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