The Federal Reserve raised interest rates by 25 basis points on Wednesday, marking its first increase in more than three years and taking its benchmark range to 3.75%-4%. Markets are now pricing in an additional 75 basis points of tightening over the next six months.
Bitcoin was trading roughly 40% below its October high of $126,000 at the time of the announcement, echoing its posture when the Fed launched its 2022 hiking cycle—BTC had peaked near $69,000 in November 2021 and was similarly down about 40% when the first rate increase arrived in March 2022.
Following that March 2022 decision, Bitcoin rallied approximately 18% over the next 12 days before falling roughly 50%. The pattern raises the possibility of another short-lived relief bounce followed by further losses, though analysts note that a single cycle offers limited predictive power. The 2022 downturn also coincided with broad losses across equities, bonds and metals alongside turbulence within the crypto industry itself.
Historical precedent suggests the current move is unlikely to stand alone. Since 1994, the Fed has executed a one-and-done rate hike just once, and isolated increases remain uncommon across the 12 tightening cycles dating back to 1955.
Inflation remains the central driver. Annual headline inflation has stayed above the Fed's 2% target for more than five years, although core inflation excluding food and energy has eased to 2.4%, its lowest level in half a decade. That progress has been undercut by an energy shock: geopolitical tensions in the Middle East have pushed both WTI and Brent crude above $100 a barrel, threatening to reignite price pressures and constrain growth. Global bond yields have also climbed, with the U.S. 10-year Treasury yield reaching 5%, adding pressure to financial conditions and risk assets.
Bitcoin's current bear phase is approaching its one-year anniversary, and the resumption of monetary tightening may prolong the downturn.
