The weakening dollar and the bullish euro could reshape cryptocurrency investments.

As the US dollar weakens, the role of the Euro in the cryptocurrency economy is emerging as an important opportunity. The increasing adoption of euro-pegged stablecoins reflects the desire of European investors to mitigate the negative impact of exchange rates on dollar-denominated assets.

Luke Nolan, a senior researcher at CoinShares, stated that he predicts this trend will continue, although he does not believe that the role of the US dollar will completely disappear.

Historical decline of the dollar

In the past few months, the US dollar has experienced a period of strong and rapid decline. The performance of the dollar in the first six months of 2025 is the worst since 1973.

According to a report by Morgan Stanley, the value of the dollar has fallen by about 11% against other currencies in the first half of this year, marking the largest decline in over 50 years and ending a 15-year growth period.

Source: StatistaInvestor confidence in the economy and assets of America has been affected by unstable government policies, particularly regarding tariffs and trade. The newly passed "One Big Beautiful Bill Act" has exacerbated these concerns, causing anxiety about rising budget deficits and national public debt.

These policies have caused investors to abandon U.S. government bonds. Based on the continuation of these policies, Morgan Stanley predicts that the dollar will fall an additional 10% by the end of 2026.

With the shift of investors away from the concept of American excellence, currencies like the Euro, a major rival of the dollar, may benefit. This trend could be particularly pronounced in the cryptocurrency sector.

Will the dominance of the dollar in cryptocurrency come to an end in Europe?

The stability and undisputed dominance of the US dollar has previously been the foundation of the global financial system, and the cryptocurrency market is no exception. For many European investors, the recent fall of the dollar has created a challenging issue. On the surface, the stable price of Bitcoin in dollars seems like a positive thing. However, this conceals an important exchange rate dynamic.

"If a European investor holds Bitcoin bought through an exchange and keeps it for a period during which the price does not change but the dollar has weakened against the Euro, then that investor will incur losses, in real terms, due to this discrepancy," Nolan shared.

The impact of this exchange rate indicates why European investors are increasingly paying attention to exchange rate risks. They realize that their profits depend not only on the performance of Bitcoin but are also directly influenced by the strength or weakness of the US dollar.

"This will be reflected in the BTC/EUR rate, as well as when investors withdraw funds, even if in dollars, because when converting back to Euros, they will receive fewer Euros than the amount invested," Nolan added.

Faced with this issue, European investors are taking practical steps to protect their cryptocurrency portfolios from the volatility of the dollar.

Dealing with the impact of exchange rates

The previous phase of a strong dollar made investing in dollar-denominated assets attractive, providing European investors with a "double win." However, with the current macroeconomic shift, this momentum has reversed. As a result, a distinct shift towards Euro-denominated trading is underway. The reassessment of exchange rate risks is also reflected in market data.

According to research from Kaiko, trading pairs quoted in USD Tether (USDT) on European exchanges have fallen in popularity in 2025. Instead, Euro-linked trading is increasingly growing. The market data provider also found that liquidity for ETH/EUR pairs has doubled compared to the previous year, indicating that this trend is not limited to Bitcoin.

The trading volume of stablecoins backed by EUR over time | Source: Kaiko Research. For European investors, this change is not just a strategic shift, but also a direct response to macro forces. "I would say there is an impact, but not a large one... Now, with the weakening dollar, if they are buying through dollar-pegged stablecoins(or withdrawing through them), then the decision becomes a dual decision: Do I think bitcoin will rise and outperform the USD/EUR pair?" Nolan said.

By trading and holding cryptocurrency in native EUR pairs, they are trying to "partially cope with the impact of exchange rates," as Nolan noted, moving towards a more direct and less risky way to participate in the digital asset market.

This shift indicates that the European market is maturing, developing its own methods and infrastructure to suit its specific economic conditions.

A new era for euro-linked assets

The shift towards trading linked to the Euro has brought new attention to euro-pegged stablecoins. Although still a small player in the cryptocurrency space, their recent development is undeniable. These digital assets provide a way to trade on the blockchain without being affected by the weakening of the dollar.

"This is noteworthy, but it is still a small fish in the big picture. EURC (Circle) has increased by 55% since the beginning of the year to 211 million, EURS (Statis) has increased by 31% since the beginning of the year to 146 million. The total market capitalization of euro-pegged stablecoins is 585 million dollars. Therefore, it is still very small in the big picture (the total market capitalization for stablecoins is 250 billion dollars)," Nolan said.

The practical usability of these stablecoins is particularly important for professional investors and businesses. They provide a way for funds to hold money in cryptocurrency assets without being exposed to exchange rate risk. The ability to operate directly in Euro is a major attraction.

"Financial desks can now hold funds entirely in Euro, which mitigates exchange rate risk ( at least in part ). Therefore, I expect that if the weakness of the dollar continues, Euro-pegged stablecoins may become more popular," Nolan added.

This recent trend also raises a bigger question about the long-term role of the dollar in the cryptocurrency market.

Will the dominance of the dollar in cryptocurrency be eroded?

The shift towards the Euro and broader global efforts at de-dollarization are prompting consideration of whether the cryptocurrency market will follow this trend.

According to Nolan, the outcome is complex and perhaps not as extreme as the term suggests. While the increase in euro-linked products is significant, it is unlikely to fundamentally affect cryptocurrencies. The scale and absolute dominance of USD-linked stablecoins continue to reinforce the global role of the dollar.

"I think this is unlikely to affect the cryptocurrency market in general. USD-pegged stablecoins are still growing very rapidly, and they actually support global dollarization as they are natural buyers of US government bonds," he explained.

However, this does not mean that this trend should be ignored. Although a comprehensive de-dollarization is not something that is about to happen, Nolan acknowledges that the market shift is clear. For example, the development of euro-pegged stablecoins provides a specific indicator of this change.

"I think that by the end of the year, surpassing 1 billion dollars in euro-pegged stablecoins seems quite feasible," Nolan added.

This trend indicates a future where the cryptocurrency market becomes more diverse. Although the dollar is likely to remain dominant, the Euro and other coins will become more influential. This will create a more localized and less risky environment for investors and businesses.

Mr. Teacher