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Is Fed’s Interest Rate Hike the Biggest Impediment to Bitcoin’s Bullish Outlook?

Written by James Smith

With speculations high that the Federal Reserve (Fed) will increase the interest rate by 75 basis points (bps) on June 15 to tame inflation, this might dent Bitcoin’s bullish outlook as the leading cryptocurrency continues to trade at an 18-month low. 

Market analyst under the pseudonym ZeroHedge noted:

“Odds of 75bps rate hike Wednesday hit 95%.”

Other analysts also believe that the stakes are high for the interest rate to be increased by 75bps or 0.75%.

For instance, Michael Feroli, an economist at JPMorgan, commented that long-term inflation expectations might cause the Fed to raise the rate by 75bps. 

Goldman Sachs analysts shared similar sentiments and stated:

“Our Fed forecast is being revised to include 75 bps hikes in June and July.”

They added:

“We anticipate two more rate increases in 2023 to 3.75-4%, followed by one cut in 2024 to 3.5-3.75%. We anticipate a 50bp increase in September, followed by 25bp increases in November and December, for an unchanged terminal rate of 3.25-3.5%. We expect the median dot to show 3.25-3.5% at end-2022.”

How is an interest rate hike bearish?

Previously, analyses have shown that an interest rate increase usually has an inverse relationship with Bitcoin because the price usually falls. 

For instance, after the Fed raised the interest rate by 50bps or 0.5% last month, a bullish picture was initially painted, but this was short-lived because Bitcoin sank to a two-month low, Blockchain.News reported. 

Arthur Hayes, a trading and crypto enthusiast, pointed out:

“The bull market can only begin once the Fed and its sycophantic cadre of other central bankers reverse course, which at the very least requires pausing rate hikes and keeping the size of their balance sheets constant.”

Mike McGlone, the senior commodity strategist at Bloomberg Intelligence, had previously noted that the Fed’s continued interest rate hike was the primary stumbling block to BTC’s price surge. 

With Bitcoin experiencing massive liquidation to the tune of $1.05 billion in the last 24 hours, the top cryptocurrency finds itself between a rock and a hard place if the speculated Fed interest rate increase materializes. 

BTC was hovering around the $22,652 level during intraday trading, according to CoinMarketCap

Image source: Shutterstock

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James Smith

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