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BTC Market observers: The Federal Reserve may make a mistake in raising interest rates, and the simultaneous decline in Bitcoin, gold, and stock markets exposes liquidity pressure.
Some market observers believe that the Federal Reserve may be a mistake to raise interest rates further, because Bitcoin, gold and stocks fell simultaneously, forming a coordinated risk-averse action. This reflects broader liquidity pressures rather than just a correction in the cryptocurrency space.
The backdrop for this concern is the simultaneous decline of Bitcoin, gold and stocks-a pattern that has been previously recorded by the market. When traditional safe-haven assets such as gold fall along with risky assets, it usually means investors are selling off across the board in exchange for cash, rather than rotating between asset classes.
Why interest rates are riskier in cross-asset sell-off
The argument against further interest rates is simple: raising rates while bitcoin, gold and stocks are simultaneously weak may deepen rather than curb existing pressures. When multiple markets have experienced downward price revaluation, tightening policies will just drain liquidity from the system.
In accordance with its monetary policy framework, the Federal Reserve uses the federal funds rate as the main tool for adjusting monetary conditions. Higher interest rates increase the cost of capital and reduce interest in long-term and speculative assets, including most cryptocurrencies. This transmission mechanism is why the Federal Reserve expects to directly affect digital assets.
Bitcoin's movements have been repeatedly linked to interest rate expectations, such as when Bitcoin stabilized when traders focused on the Federal Reserve and inflation data. The current correction also reflects sensitivity to policy risks.
Implications for Bitcoin investors from market reaction
The key conclusion is that Bitcoin's movements are part of the macro liquidity story, not a catalyst for the cryptocurrency itself. It fell along with gold and stocks, suggesting that the driver was common exposure to Fed policy concerns rather than specific issues with the token itself.
The signal of gold is worth noting. The correlation between Bitcoin and gold has changed before, for example, when Bitcoin came under pressure and gold's safe-haven properties returned. But the simultaneous decline in both undermines the view that either asset is currently serving as a safe haven.
The market has previously been warned of the downside risks brought by tightening policies. Some institutions have pointed out that if the Federal Reserve raises interest rates, Bitcoin may fall further, which is consistent with the view of current observers who warn against raising interest rates again.
Next, participants will focus on the Fed's own signals. Investors can learn about the results of the latest policy meeting through the Fed's minutes, which detail how officials weighed inflation against financial conditions-the core balance of the current debate.
