🚨 FED | MY ANSWER TO YOUR QUESTIONS
What happens to Bitcoin if the Fed raises interest rates?
Let’s take a look at history.
The Fed last raised rates in July 2023. During the tightening cycle that began in March 2022, we saw a total of 11 rate hikes. During that period, #Bitcoin fell from around $40K to the $20K region.
However, we didn’t see the same reaction after the final hike. Following the 25 bps hike in July 2023, BTC didn’t fall sharply — instead, it moved higher.
Because the rate hike had already been priced in.
We have a similar situation today. A 25 bps hike is largely priced in.
So, what am I expecting?
My base case is a 25 bps hike today and one more 25 bps hike later this year. In other words, I’m expecting two hikes in total.
I don’t expect an aggressive, consecutive tightening cycle like we saw in 2022. However, if the Fed signals that more tightening is on the table, it wouldn’t be surprising to see increased pressure on crypto.
The message from Warsh will be especially important.
Frankly, I don’t expect him to deliver a dovish message on inflation.
If he signals that more hikes could follow, the market could price that in more aggressively.
As I said, my expectation is a process limited to two hikes, but Warsh’s message is important enough to change that expectation. ✍️
What happens to Bitcoin if the Fed raises interest rates?
Let’s take a look at history.
The Fed last raised rates in July 2023. During the tightening cycle that began in March 2022, we saw a total of 11 rate hikes. During that period, #Bitcoin fell from around $40K to the $20K region.
However, we didn’t see the same reaction after the final hike. Following the 25 bps hike in July 2023, BTC didn’t fall sharply — instead, it moved higher.
Because the rate hike had already been priced in.
We have a similar situation today. A 25 bps hike is largely priced in.
So, what am I expecting?
My base case is a 25 bps hike today and one more 25 bps hike later this year. In other words, I’m expecting two hikes in total.
I don’t expect an aggressive, consecutive tightening cycle like we saw in 2022. However, if the Fed signals that more tightening is on the table, it wouldn’t be surprising to see increased pressure on crypto.
The message from Warsh will be especially important.
Frankly, I don’t expect him to deliver a dovish message on inflation.
If he signals that more hikes could follow, the market could price that in more aggressively.
As I said, my expectation is a process limited to two hikes, but Warsh’s message is important enough to change that expectation. ✍️