The probability of the Federal Reserve raising interest rates rises, and Bitcoin falls below $80,000

Expectations for the Federal Reserve to raise interest rates are heating up, and Bitcoin has successively fallen below the US$80,000 and US$77,000 barriers.

As Bitcoin continues to fall in two trading days, market traders have raised their expectations for the probability of the Federal Reserve raising interest rates. In early September, Bitcoin experienced a two-day decline: first it fell below the $80,000 mark, and then slipped further below $77,000. According to reports quoted by Bitfinex Alpha, the exchange's research arm, the decline is closely related to rising market expectations for the Federal Reserve to raise interest rates.

CryptoPotato reported on September 8 that Bitcoin prices have calmed down below US$80,000 as the possibility of the Federal Reserve raising interest rates increases. Two days later, U.Today reported that Bitcoin, the largest cryptocurrency by market capitalization, fell wider to below $77,000, and the report described the probability of a rate hike as surging. Together, the two reports point to a continued downward trend rather than a single isolated price fluctuation.

The far-reaching impact of interest rate expectations on asset allocation

Interest rate expectations play a crucial role when traders allocate various risky assets, including cryptocurrencies. An increase in the probability of raising interest rates usually indicates that monetary policy will tighten in the future. In this policy environment, highly speculative and non-interest-generating assets such as Bitcoin tend to become less attractive as investors can obtain higher returns from safer instruments such as government bonds or money market funds.

Bitfinex Alpha has become a frequently cited source in market commentary, with its analysis often linking price fluctuations in crypto assets to macroeconomic signals. Its notes are often cited in media that track the correlation of Bitcoin with traditional financial indicators such as Federal Reserve policy expectations, Treasury yields and the strength of the dollar.

It is worth noting that the change in the probability of raising interest rates itself reflects market pricing adjustments based on economic data, Fed remarks or futures market positions, rather than an official announcement from the Fed. Traders often adjust these probabilities for inflation reports, employment data or statements from Fed officials. It is unclear which data point or event triggered the expected shift between the two reports.

Close linkage of macro policy signals

Bitcoin's price movements during this period indicate that the asset is now increasingly closely linked to macro policy signals. In the past, many people viewed Bitcoin as a hedging tool away from traditional finance, but now it is increasingly fluctuating in sync with stock market and interest rate expectations. This correlation is particularly evident during periods of high uncertainty in monetary policy.

Market Impact Analysis

Rising expectations of the Fed's interest rate hike usually put pressure on all risky assets, and Bitcoin's fall below $77,000 also fits this broad pattern. Rising borrowing costs could reduce liquidity for speculative investments, which historically has tended to have a negative impact on the valuation of crypto assets during tightening cycles.

Traders following Bitcoin price movements may continue to monitor Fed related data releases and futures market pricing for further signals. Volatility around policy expectations may persist until the Fed's next scheduled decision clarifies the direction of interest rate policy. Bitcoin's fall below $77,000 highlights the sensitivity of the crypto market to changes in Fed interest rate expectations, a dynamic that is likely to continue as long as policy uncertainty persists.

FAQs

Why did Bitcoin fall below US$80,000 first and then below US$77,000?

Quoting Bitfinex Alpha, it attributed the decline to rising market expectations for the Federal Reserve to raise interest rates. Expectations to raise interest rates often reduce investors 'appetite for risky assets such as Bitcoin.

What is Bitfinex Alpha?

Bitfinex Alpha is the research arm of the Bitfinex Exchange. It often publishes comments on the macroeconomic impact on digital asset prices and has been quoted by several crypto news media.

How does Fed rate hike expectation affect bitcoin price? [TAG

Higher expected interest rates generally make safer, yield-generating assets more attractive than speculative assets, which may reduce demand for bitcoin and depress its price.

Has the Fed confirmed a rate hike?

Related reports describe an increase in the probability of a market rate hike based on trader positions and data, rather than confirmed Fed decisions or official announcements.