Analysis of the Relationship between Fed Interest Rate Policy and Bitcoin Price Movement

In the past decade, the high points of Bitcoin's bull markets and the low points of bear markets have been closely related to the Fed's interest rate policies. Typically, the market peaks when expectations for interest rate hikes are strongest and bottoms out when expectations shift toward rate cuts.

Currently, the market faces three possible development paths:

1. Restarting interest rate hikes may lead to a second bottom.
2. Interest rate cuts in the second half of the year may trigger fluctuations before reaching the peak.
3. Mid-year interest rate cuts may accelerate the bull market process.

These paths will have a significant impact on the future price movement of Bitcoin.

Review of the Fed's Ten-Year Interest Rate Policy: How Do Bitcoin's Highs and Lows Correspond?

In the past decade (around 2015-2025), the Fed has undergone a complete cycle of interest rate hikes, cuts, further hikes, and pauses. By analyzing this historical period, we find significant correlations between the turning points in Bitcoin prices and the policy nodes of the Fed, especially the phenomenon of market expectations reacting in advance.

The main conclusions are as follows:

1. The peak of Bitcoin's bull market usually occurs before the initiation or acceleration of interest rate hikes, reflecting the market's anticipation of tightening.

2. The bear market lows of Bitcoin often occur in the later stages of interest rate hikes, during pauses in rate increases, or just before the onset of a rate cut cycle. The market seeks a bottom when the most pessimistic or accommodative expectations arise.

3. Quantitative easing (QE) or large-scale easing policies such as rapid interest rate cuts are key factors driving the bull market.

The current market is in a "pause on interest rate hikes" and "temporary interest rate cuts" plateau, awaiting the next clear directional signal—whether there will be another interest rate cut and enter a new round of quantitative easing.

Analysis of Three Interest Rate Scenarios Based on Institutional Forecasts

As of now (April 2025), there is a divergence in the market regarding the Fed's next move. Based on the perspectives of several leading research institutions, we have summarized three possible scenarios:

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

Some institutions indicate that if employment and inflation data unexpectedly remain strong, the possibility of discussing interest rate hikes this year cannot be ruled out. At the same time, tariff policies and geopolitical factors may drive up inflation, forcing the Fed to maintain a tightening policy.

2. Baseline scenario: Start cutting interest rates in the second half of the year, with a total of 2 rate cuts for the year.

Most institutions expect the Fed to remain patient until June, followed by two rate cuts, bringing the interest rate to a range of 3.75%-4.00% by the end of the third quarter.

3. Best case scenario: start interest rate cuts in the middle of the year, with 3 or more cuts throughout the year.

Some viewpoints suggest that if the pace of inflation declines more than expected or the economy shows clear signs of weakness, the Fed may implement three or more interest rate cuts in 2025.

Prediction of Bitcoin Price Movement under Three Interest Rate Scenarios

Based on the three interest rate scenarios mentioned above, we forecast the future price movement of Bitcoin:

1. Worst case: The top has appeared or a second bottom is being tested, dominated by bear market thinking.

If the market confirms the presence of interest rate hike risks, Bitcoin may face selling pressure in the second quarter of 2025 and beyond. Previous highs may become the final peak of this cycle. Market sentiment may turn pessimistic, leading to a deep correction, and there may even be a second bottom.

2. Benchmark situation: Patient oscillation, year-end impact on the peak area

During the second to third quarter, while waiting for clear signals of interest rate cuts, Bitcoin may maintain a high position with wide fluctuations. Once the expectations for interest rate cuts are confirmed and the first cut is implemented at the end of the third quarter or in the fourth quarter, it may trigger the final sprint of the bull market. The peak of the cycle may appear in the fourth quarter of 2025 or early 2026.

3. Best case scenario: bull market accelerates, peaks earlier and possibly higher.

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

Overall, the Fed's interest rate decisions remain a key factor in global asset pricing, significantly impacting highly volatile assets like Bitcoin. Although market sentiment fluctuates repeatedly, according to mainstream institutions' forecasts, we are still at a critical juncture of expected swings. When adjusting investment strategies, it is advisable to maintain a moderate optimism while reducing positions.