Ethereum at a crossroads: how the weakening dollar affects ETH growth – analysis for investors

When the dollar weakens, cryptocurrencies gain

The cryptocurrency market shows a clear dependence on the behavior of the fiat currency. Analysts observe a consistent relationship between the movements of the dollar index and the price changes of Bitcoin and Ethereum. When the dollar rate falls, risky assets such as cryptocurrencies usually find upward support. Conversely – a strengthening dollar typically limits investors’ appetite for exposure to more volatile instruments. In the current market cycle, increased sensitivity to dollar fluctuations has become a key factor shaping trends in the crypto market.

Market positioning on the dollar – a warning signal

Observations from major market players indicate an extraordinary intensity of short positions against the dollar. Such mass betting on the currency’s weakness creates a potential scenario of a shock rally in the dollar price, which could reverse the current trends in the risky asset market. For Ethereum holders, this poses a specific threat to the bullish scenario that underpins many price forecasts for ETH over the coming months.

The first contact with the 200-day moving average of the dollar index (DXY) occurred recently – for the first time in nearly a year, the price closed above this technical level. This movement suggests that the prolonged trend of dollar weakness may be threatened by a more decisive rebound.

Ethereum (ETH) currently: $3.12K – key levels to watch

Ethereum is currently trading around $3.12K, maintaining a long-term upward trend line that has provided solid support over the past two years. The technical formation takes the shape of an expanding wedge, with its upper vertex oriented toward approximately $4,000.

The first barrier remains resistance at the $4,000 level, where previous rallies faced selling pressure. Breaking through this zone would open the door to significantly higher price targets, potentially toward new market highs.

However, a bearish scenario should not be ignored. If the strengthening dollar triggers a wave of selling and support does not hold, Ethereum could fall below the trend line and test the support zone in the $2,300–$2,400 range.

What every investor should know?

The future direction of Ethereum’s price will largely depend on whether the dollar continues to strengthen or returns to weakness. The current market positioning on dollar weakness is a double-edged sword – the potential for large gains is significant, but the threat of a sudden reversal is equally real. ETH investors should carefully monitor dollar movements, as a break above the 200-day moving average of the DXY could set the course for the coming weeks.