The Fed Restarts Rate Hikes—Why Didn’t Bitcoin Crash?
Against a backdrop of repeated tug-of-war in macro liquidity expectations, the crypto market has recently shown a resilience that is markedly different from past cycles. On September 16, the Federal Reserve announced it would raise the federal funds rate by 25 basis points to 3.75%–4.00%, the first rate hike since the tightening cycle ended in 2022. Under traditional financial logic, rising rates typically mean higher risk-free yields, downward pressure on risk-asset valuations, and Bitcoin—being a high-beta asset—should logically have been hit hard. Yet reality has diverged from this linear projection: on the day the hike was implemented, Bitcoin’s price briefly dipped to $75,064.82, but it quickly reclaimed the $76,000 level. Over the following few trading days, it moved back above $81,000 and even touched above $84,000. Meanwhile, the S&P 500 fell by about 0.7% and the Dow Jones fell by about 1.2%. Two-year U.S. Treasury yields climbed to 4.734%. Traditional financial markets showed the expected “risk-off” and repricing response, but only the crypto market displayed abnormal stickiness. This divergence has sparked widespread discussion in the market about “Bitcoin decoupling from the Fed.” However, if that interpretation lacks a deep analysis of fund flows and expectation-pricing mechanisms, it can easily fall into a superficial misunderstanding.
Bitcoin’s strength in the face of the rate hike is not due to a sudden change in its fundamentals, but rather to an extreme front-loading of expectations management. Looking back at the macro narrative over the past six weeks, the market essentially completed a full “bad news already priced in” process. As early as late July, when nonfarm payroll data came in far below expectations, the market’s probability outlook for a September rate hike dropped sharply. Then, on August 28 at the Jackson Hole conference, remarks by Fed Chair Kevin Warsh proved to be a key turning point. The CME FedWatch tool showed the probability of a September rate hike leaping from roughly 35% to 66% overnight. Afterwards, as the probability briefly fell to 58% following the release of August nonfarm data, and then rose again after the PPI and CPI data were released—pushing it to 70% and even 86%—market sentiment gradually converged through the validation of incoming data. By September 15, one day before the hike was implemented, pricing in the fixed-income derivatives market had already exceeded 92.5%. This means that when the Fed officially announced the rate hike on September 16, it was no longer an “unexpected” event for holders—it was a “confirmation.” Like an earthquake early-warning system that sounds an alert in advance, residents evacuating early reduces building damage. Bitcoin’s resilience isn’t because the foundation has become stronger, but because everyone involved has prepared for it ahead of time.
However, beneath the surface of resilience lies a more complex contradiction in the capital structure. If you only look at price action, it’s easy to overlook the true direction of funds. On the eve of the rate hike taking effect—September 15—against the backdrop of the implementation deadline, all-market Bitcoin spot ETF flows recorded a net outflow of $450.4 million. Specifically, BlackRock’s IBIT saw a $161.7 million outflow, and Fidelity’s FBTC saw a $214.8 million outflow. This directly refutes optimistic narratives about an “independent rally” or “capital inflows,” indicating that institutional allocation positioning may have taken profits or adjusted holdings ahead of expectation being realized. The reason this nearly $450 million outflow did not trigger a price crash lies mainly in Bitcoin spot ETFs’ enormous existing base. As of September 14, total net assets of U.S. Bitcoin spot ETFs were about $100.09 billion. Compared with this thousand-billion-level pool, a $450 million single-day outflow represents only a tiny fraction—so the marginal selling pressure is diluted by the massive liquidity inventory. This structural buffer gives Bitcoin greater price stability when facing macro headwinds than pure derivatives markets can. But this does not mean the risk has disappeared. On the contrary, it reveals that the market’s primary risk source has shifted from “macroeconomic policy uncertainty” to “on-chain leverage crowding.”
The risk that is not yet fully priced by the market now lies in the high-leverage long positions piled up in the derivatives markets for major altcoins such as Ethereum (ETH), Solana (SOL), and Ripple (XRP). Because the existence of spot ETFs partially transfers Bitcoin’s pricing power to traditional financial allocation desks, it has a “ballast stone” effect. By contrast, other major coins’ pricing still relies heavily on the long-versus-short tug-of-war in the derivatives market. After the rate-hike expectations are fully priced in and the hike is implemented, uncertainty at the macro level temporarily subsides—but leverage risk at the micro level is not released in sync. If volatility driven by non-macro factors later emerges (such as exchange security incidents, sudden regulatory tightening, or unusual on-chain transfers of large amounts), these leveraged positions not covered by the “early-warning system” could become the ignition point. Therefore, investors must remain clear-headed: Bitcoin’s resilience is the result of both structural buffers and front-loaded expectations—not a signal of strengthened fundamentals. In a phase where macro policy enters an observation period and market attention shifts to on-chain micro structure, blindly extrapolating Bitcoin’s resilience to the entire crypto market, or ignoring the potential liquidation risk from contract leverage, could lead to serious strategy deviations. The key to what happens next is not whether the Fed continues hiking, but whether these high-leverage positions can be absorbed smoothly in calm conditions—or whether they could trigger chain reactions during some unexpected jolt.
Follow me—my next post will be a quick market scan so you don’t miss anything.
Against a backdrop of repeated tug-of-war in macro liquidity expectations, the crypto market has recently shown a resilience that is markedly different from past cycles. On September 16, the Federal Reserve announced it would raise the federal funds rate by 25 basis points to 3.75%–4.00%, the first rate hike since the tightening cycle ended in 2022. Under traditional financial logic, rising rates typically mean higher risk-free yields, downward pressure on risk-asset valuations, and Bitcoin—being a high-beta asset—should logically have been hit hard. Yet reality has diverged from this linear projection: on the day the hike was implemented, Bitcoin’s price briefly dipped to $75,064.82, but it quickly reclaimed the $76,000 level. Over the following few trading days, it moved back above $81,000 and even touched above $84,000. Meanwhile, the S&P 500 fell by about 0.7% and the Dow Jones fell by about 1.2%. Two-year U.S. Treasury yields climbed to 4.734%. Traditional financial markets showed the expected “risk-off” and repricing response, but only the crypto market displayed abnormal stickiness. This divergence has sparked widespread discussion in the market about “Bitcoin decoupling from the Fed.” However, if that interpretation lacks a deep analysis of fund flows and expectation-pricing mechanisms, it can easily fall into a superficial misunderstanding.
Bitcoin’s strength in the face of the rate hike is not due to a sudden change in its fundamentals, but rather to an extreme front-loading of expectations management. Looking back at the macro narrative over the past six weeks, the market essentially completed a full “bad news already priced in” process. As early as late July, when nonfarm payroll data came in far below expectations, the market’s probability outlook for a September rate hike dropped sharply. Then, on August 28 at the Jackson Hole conference, remarks by Fed Chair Kevin Warsh proved to be a key turning point. The CME FedWatch tool showed the probability of a September rate hike leaping from roughly 35% to 66% overnight. Afterwards, as the probability briefly fell to 58% following the release of August nonfarm data, and then rose again after the PPI and CPI data were released—pushing it to 70% and even 86%—market sentiment gradually converged through the validation of incoming data. By September 15, one day before the hike was implemented, pricing in the fixed-income derivatives market had already exceeded 92.5%. This means that when the Fed officially announced the rate hike on September 16, it was no longer an “unexpected” event for holders—it was a “confirmation.” Like an earthquake early-warning system that sounds an alert in advance, residents evacuating early reduces building damage. Bitcoin’s resilience isn’t because the foundation has become stronger, but because everyone involved has prepared for it ahead of time.
However, beneath the surface of resilience lies a more complex contradiction in the capital structure. If you only look at price action, it’s easy to overlook the true direction of funds. On the eve of the rate hike taking effect—September 15—against the backdrop of the implementation deadline, all-market Bitcoin spot ETF flows recorded a net outflow of $450.4 million. Specifically, BlackRock’s IBIT saw a $161.7 million outflow, and Fidelity’s FBTC saw a $214.8 million outflow. This directly refutes optimistic narratives about an “independent rally” or “capital inflows,” indicating that institutional allocation positioning may have taken profits or adjusted holdings ahead of expectation being realized. The reason this nearly $450 million outflow did not trigger a price crash lies mainly in Bitcoin spot ETFs’ enormous existing base. As of September 14, total net assets of U.S. Bitcoin spot ETFs were about $100.09 billion. Compared with this thousand-billion-level pool, a $450 million single-day outflow represents only a tiny fraction—so the marginal selling pressure is diluted by the massive liquidity inventory. This structural buffer gives Bitcoin greater price stability when facing macro headwinds than pure derivatives markets can. But this does not mean the risk has disappeared. On the contrary, it reveals that the market’s primary risk source has shifted from “macroeconomic policy uncertainty” to “on-chain leverage crowding.”
The risk that is not yet fully priced by the market now lies in the high-leverage long positions piled up in the derivatives markets for major altcoins such as Ethereum (ETH), Solana (SOL), and Ripple (XRP). Because the existence of spot ETFs partially transfers Bitcoin’s pricing power to traditional financial allocation desks, it has a “ballast stone” effect. By contrast, other major coins’ pricing still relies heavily on the long-versus-short tug-of-war in the derivatives market. After the rate-hike expectations are fully priced in and the hike is implemented, uncertainty at the macro level temporarily subsides—but leverage risk at the micro level is not released in sync. If volatility driven by non-macro factors later emerges (such as exchange security incidents, sudden regulatory tightening, or unusual on-chain transfers of large amounts), these leveraged positions not covered by the “early-warning system” could become the ignition point. Therefore, investors must remain clear-headed: Bitcoin’s resilience is the result of both structural buffers and front-loaded expectations—not a signal of strengthened fundamentals. In a phase where macro policy enters an observation period and market attention shifts to on-chain micro structure, blindly extrapolating Bitcoin’s resilience to the entire crypto market, or ignoring the potential liquidation risk from contract leverage, could lead to serious strategy deviations. The key to what happens next is not whether the Fed continues hiking, but whether these high-leverage positions can be absorbed smoothly in calm conditions—or whether they could trigger chain reactions during some unexpected jolt.
Follow me—my next post will be a quick market scan so you don’t miss anything.
