Dollar strength weighs on Bitcoin, but an AI bust could bring longer-term support

A stronger dollar could pressure Bitcoin in the short term, while an unwinding of the AI investment boom could eventually support it by weakening U.S. equities and the dollar, according to Bitwise’s Andre Dragosh.

The argument rests on a shift in international capital flows: weaker U.S. stock performance could draw money away from American markets, putting downward pressure on the dollar and creating more favorable conditions for Bitcoin.

Speaking in a Bitcoin Magazine interview on November 1, Dragosh, Bitwise’s head of European research, said the dollar had been Bitcoin’s dominant macroeconomic driver over the past six months. Further dollar strength could weigh on Bitcoin in the near term, he said.

Dragosh pointed to widening French government bond spreads over German debt as a potential source of dollar strength. France’s debt-to-GDP ratio exceeds 100%, compared with close to 60% for Germany, he said. Domestic political uncertainty also adds to French sovereign risk, with markets pricing in some probability of France leaving the eurozone, in his assessment.

Although demand for safety within the eurozone favors German government bonds, Dragosh said French fiscal risks could indirectly increase the burden on other members and push capital toward bond markets outside the currency bloc. Those outflows could weaken the euro, strengthen the dollar and put pressure on Bitcoin.

He linked widening French sovereign spreads, U.S. CCC-rated high-yield bond spreads and hyperscaler credit default swap spreads to a broader tightening of financial conditions. Global growth expectations, however, had been the dominant macroeconomic influence on the S&P 500 over the past six months, he said. Deteriorating growth expectations therefore helped explain why equities had faced greater pressure while Bitcoin remained relatively resilient.

For the longer term, Dragosh focused on whether the AI investment boom can last. After the dot-com bubble, he said, U.S. equities underperformed markets elsewhere, capital flowed out and the dollar entered a downtrend. Since 2010, relative equity performance had explained more of the dollar’s movement than relative bond performance, he added.

That longer-term argument depends on the AI trade proving to be a bubble and the subsequent adjustment potentially lasting several years, Dragosh said. Under that scenario, a structural dollar decline could support Bitcoin alongside a renewed commodity supercycle—an environment he said Bitcoin had yet to experience.