Bond traders just flagged a rare risk for Bitcoin price, one it has not seen since 2023. They now expect the Federal Reserve to start raising interest rates again, likely by December. As the investors who buy and sell government debt, they bet real money on where rates head next. Therefore, the markets watch them as an early signal on the Fed.
A hike would be the Fed's first since 2023. The last time policymakers were tightening, Bitcoin lost about 65%, yet that same squeeze also helped set its cycle bottom.
The bond market has turned. Traders and Fed Chair Kevin Warsh agree the inflation fight is not over, and markets now price a quarter-point hike as likely by September or October and all but certain by December, Bloomberg reported in its rate outlook.
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The pressure is stacking up. Inflation has sat above the Fed's 2% target for five years, oil is climbing again after the Iran ceasefire collapsed, and heavy AI spending keeps stimulating the economy. Last week's cooling June inflation print brought only brief relief before hike bets rebuilt.
This is the rare part. The Fed has not raised rates since 2023, so a fresh increase would be Bitcoin's first tightening in years.
During that last cycle, across 2022 and 2023, the Fed lifted rates from near zero to 5.5%, and Bitcoin sank from about $45,000 to a $15,500 cycle low on November 22, 2022, a drop near 65%.
However, the hikes themselves were mostly priced in. The worst damage came from surprises and pace, like the June 2022 jump to 75 basis points that, with the Terra collapse, drove a roughly 52% plunge.
By contrast, Bitcoin rose about 21% in early 2023, when the hikes were fully expected.
Here is the twist. That November 2022 low did not form after the Fed relented. It formed at the moment of peak hawkishness, and Bitcoin turned higher as the market finished pricing the tightening.
So a fresh hawkish shock could act the same way, flushing out the last sellers. Analysts already track a cluster of rare bottom signals, with on-chain metrics at four-year lows even as long-term holders refuse to sell.
For now, Bitcoin price sits near $63,800, down about 1% on the day, caught between fading inflation and rising hike bets. The CME FedWatch tool and the bond market now lean toward an increase, even multiple hikes as the worst case scenario.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
