Analysis of the Relationship Between Fed Interest Rate Policy and Bitcoin Market Trends

In the past decade, the price trend of Bitcoin has shown a close relationship with the Fed's interest rate policy. By observing historical data, we can find some interesting patterns:

1. The peak of the Bitcoin bull market typically occurs during periods of the strongest interest rate hike expectations.
2. The bottom of a bear market often coincides with the timing when market expectations shift towards interest rate cuts.

Currently, the market is facing three possible development paths:

• Restarting interest rates: may lead to Bitcoin price testing the bottom again
• Interest rate cuts will begin in the second half of the year: this may trigger a peak market after the turbulence.
• Starting to cut interest rates mid-year: may accelerate the bull market process

These different paths will have a significant impact on the future trend of Bitcoin.

Review of the Fed's Ten-Year Interest Rate Policy and Its Interaction with Bitcoin Prices

In the past decade (around 2015-2025), the Fed has experienced a complete cycle of interest rate hikes, cuts, rate increases again, and then pauses. By reviewing this history, we can find a significant correlation between important turning points in Bitcoin prices and the Fed's policy nodes, particularly the market expectation of the "anticipatory reaction" phenomenon is worth paying attention to.

The main observations are as follows:

1. The peak of Bitcoin's bull market usually precedes the initiation or acceleration of actual interest rate hikes, reflecting the market's anticipation of tightening.
2. The bottom of the Bitcoin bear market often occurs during the late stages of interest rate hikes, the pause in interest rate hikes, or just before the start of a rate cut cycle. This indicates that the market seeks a bottom when the most pessimistic or loose expectations arise.
3. Quantitative easing (QE) or large-scale interest rate cuts, known as "large-scale easing" policies, are important catalysts for driving bull markets.

Currently, the market is in a transition phase between "pausing interest rate hikes" and "short-term interest rate cuts," awaiting the next clear directional signal—whether it will enter another interest rate cut cycle, or even initiate a new round of quantitative easing.

Three Interest Rate Scenario Analyses Based on Institutional Forecasts

According to the views of several mainstream research institutions, we can summarize the following three possible scenarios:

1. Worst case scenario: facing interest rate hike risks in 2025-2026

Some institutions warn that if employment and inflation data is unexpectedly strong, the possibility of discussing interest rate hikes this year cannot be ruled out. Adjustments in tariff policies and geopolitical factors may pose upward pressure on inflation, which could force the Fed to maintain a tightening policy, leading to a persistent high interest rate environment and continued pressure on market liquidity.

2. Baseline scenario: Start cutting interest rates in the second half of the year, with two rate cuts throughout the year.

Most institutions expect the Fed to start cutting interest rates after June, with two rate cuts of 25 basis points each throughout the year. They believe that although inflation remains somewhat sticky, the overall trend is downward, and the economy and job market will gradually cool.

3. Best Case Scenario: Start interest rate cuts mid-year, with three or more cuts throughout the year.

Some institutions expect that if inflation decreases faster than expected or the economy significantly weakens, the Fed may implement three or more interest rate cuts in 2025. Bets on a more aggressive easing path are also heating up.

Bitcoin Price Trends Simulation Under Three Interest Rate Scenarios

Based on the above three interest rate scenarios, we can make the following projections for Bitcoin's future price movement:

1. Bitcoin trend in the worst case scenario

If the market confirms the existence of interest rate hike risks, Bitcoin may face significant selling pressure in the second quarter of 2025 and beyond. The previous high may be the final peak of this cycle. Market sentiment may turn pessimistic, and the possibility of a deep correction or a second bottom cannot be ruled out.

2. Bitcoin Trends Under Benchmark Conditions

In the second and third quarters, while waiting for clear signals of interest rate cuts, Bitcoin may maintain a high level of wide fluctuations. Once the expectation of interest rate cuts is confirmed and the first rate cut is implemented at the end of the third quarter or in the fourth quarter, it may trigger the final wave of the bull market. The peak of the cycle may occur in the fourth quarter of 2025 or early 2026, which aligns with predictions from some halving cycle models.

3. Bitcoin performance in the best-case scenario

If an unexpected economic downturn forces the Fed to cut interest rates early, it will significantly boost market risk appetite. Bitcoin is expected to quickly shake off the fluctuations and launch a strong offensive, driving the entire crypto market into a frenzy. The peak of the cycle may be brought forward to the third quarter or early fourth quarter of 2025, and it may reach a higher level.

Conclusion

The Fed's interest rate decisions remain an important reference for global asset pricing, particularly impacting high volatility assets such as Bitcoin. Although current market sentiment is fluctuating, according to mainstream institution forecasts, we are still at a critical node of expected oscillation. When adjusting investment strategies, it may be prudent to maintain a cautiously optimistic attitude.