Fed Minutes Spark Rate Hike Fears, Threatening Bitcoin's Price Stability

The Federal Reserve's recent meeting minutes have sent shockwaves through the cryptocurrency market, highlighting a growing likelihood of rate hikes and tightening monetary policy.

At the beginning of the year, markets were expecting two or more rate cuts before year-end, but by May 20, the probability of a rate hike by December had increased to 54.1%, according to CME FedWatch.

The shift in monetary policy expectations has significant implications for Bitcoin's price stability, as it now trades almost entirely on liquidity and risk appetite shaped by Fed policy.

A stronger dollar tightens financial conditions globally and puts pressure on assets priced in dollars, including Bitcoin. The 10-year Treasury yield hit a 12-month high of 4.54% on May 15, making a non-yielding asset like Bitcoin less attractive to institutional allocators.