Bitcoin's Reaction to Federal Reserve Rate Hikes

The Federal Reserve's most aggressive tightening cycle in four decades has reshaped financial markets, including its impact on Bitcoin. To analyze this relationship, we studied the cryptocurrency's reaction to each of the 11 rate hikes between March 2022 and July 2023.

Our research shows that surprise and pace matter more than the hike itself when it comes to Bitcoin's performance. The sharpest declines came early in the cycle, particularly during the June 2022 period when expectations shifted rapidly from 50 bps to 75 bps within days, combined with the Terra/LUNA collapse.

As the cycle matured and hikes became smaller and more predictable, Bitcoin's sensitivity declined sharply. By the final two hikes in 2023, the price barely moved, indicating that markets had absorbed the new rate environment and were already looking ahead to what came next.