Fed Rate Hike Aftermath: Where Will Bitcoin Go Next?

Original Title: "Retrospect of the Federal Reserve's 10-Year Rate Cycle: Under Three Path Scenarios, Where Will Bitcoin Head?"

Original Source: Biteye

Over the past decade, Bitcoin's bull tops and bear bottoms have mirrored the Federal Reserve's interest rate policy.

· Tops often occur during the strongest interest rate hike expectations

· Bottoms, on the other hand, are accompanied by expectations of a shift to rate cuts

· Now, the market stands at a fork in the road with three paths:

· Rate hike resumption → Double bottom?
· Rate cut in the second half of the year → Peak surge after volatility?

· Mid-year rate cut → Bull market acceleration?

These paths will determine Bitcoin's next move.

This article will dissect BTC's trends under three scenarios, providing a comprehensive understanding of the macroeconomic and price game theory.

I. Retrospect of the Federal Reserve's 10-Year Rate Policy: How Does Bitcoin's "Top" and "Bottom" Align?

Over the past decade (approximately 2015-2025), the Federal Reserve has gone through a complete cycle of rate hikes, rate cuts, rate hikes again, and then a pause. Reviewing this history, we find a fascinating correlation between Bitcoin's price turning points and the Fed's policy milestones, especially the market's anticipatory "preemptive response" phenomenon.

Starting with the conclusions:

1. Bitcoin's bull tops often precede the start or intensification of rate hikes, with the market preemptively trading a tightening expectation.

2. Bitcoin's bear bottoms usually occur towards the end of rate hikes, during a pause in rate hikes, or before the start of a rate-cutting cycle. The market seeks a bottom when the most pessimistic or accommodative expectations arise.

3. Quantitative easing (QE) or rapid rate cuts, known as "major liquidity injections," are key catalysts for bull markets.

The following is a comparative table of the Federal Reserve's main rate policy over the past decade and key Bitcoin trends:

This table clearly shows the "time lag" between key turning points in Bitcoin's price and the Federal Reserve's policy cycle. Whether in 2017 or the 2021 bull market peak, they occurred either just before the "hammer" of rate hikes fell or at the peak of rate hikes. The bottoms of bear markets, on the other hand, often coincide with expectations shifting towards rate cuts.

We are currently in a period of "pause in rate hikes" and "brief rate cuts," with the market awaiting the next clear directional signal—whether there will be another rate cut to enter a phase of quantitative easing and "major liquidity injections."

2. Interest Rate Projection: Three Scenarios Based on Institutional Forecasts

Currently (April 2025), there is significant market divergence regarding the Federal Reserve's next steps. We have summarized three possible scenarios based on recent viewpoints from several mainstream research institutions:

1. Worst Case: Facing Rate Hike Risk in 2025-2026

· J.P. Morgan (March initial report viewpoint): While predicting a rate cut, it also clearly stated that if employment and inflation data unexpectedly strengthen, there is a possibility of discussing a rate hike within the year.

· LSEG (London Stock Exchange Group, early April report viewpoint): Emphasizing the rising risk of "stagflation" and inflation stickiness, it believes that the reasons supporting an "extension of the policy pause period" are very compelling.

Tariff policies, geopolitical risks contributing to potential upward inflationary pressures, all of these could force the Fed to maintain tightening, potentially resulting in a high-interest rate environment throughout the year, with continued market liquidity under pressure.

2. Base Case: Rate Cut Initiation in the Second Half, Twice in the Year

· J.P. Morgan (March initial report viewpoint): Predicted that the Fed will remain patient until June, then cut rates twice, with rates expected to reach 3.75%-4.00% by the end of Q3.

· EY (Ernst & Young, March report viewpoint): Expects 2 rate cuts in 2025, one in June and one in December, each for 25 basis points.

· Fed March Meeting: Most officials still expect 2 rate cuts in 2025, bringing the annual rate down to 3.75% to 4%.

These viewpoints believe that despite inflation stickiness, the overall trend is downward, with the economy and job market gradually cooling off. The first half of the year will see a wait-and-see market, and the rate-cut cycle will begin in the second half.

3. Best Case: Rate Cut Initiation Mid-Year, Three or More Times in the Year

· Morningstar (March 28th report viewpoint): Expects the first rate cut to possibly occur in June, with a total of 3 rate cuts in 2025 (75 basis points), bringing the year-end rate to 3.50%-3.75%.

· Polymarket: According to Polymarket data, the most bet-on scenario is for 3 rate cuts in the year (75 basis points), accounting for approximately 20%. Following that are 4 rate cuts (100 basis points) and 5 rate cuts (125 basis points), at 18% and 13.3% respectively, reflecting a warming up of market bets on an aggressive easing path. The previously favored scenario of "only 2 rate cuts" at the beginning of the year now has a support rate of around 13%. Overall, the market has largely reached a consensus on "at least 2 rate cuts in 2025," but there is still significant disagreement regarding whether a more aggressive easing cycle will be entered, and expectations are not yet anchored.

These viewpoints suggest that if inflation decreases more rapidly than expected, or if the economy significantly weakens, the Fed may implement three or more rate cuts in 2025.

Three, Bitcoin Price Projection: How Will Bitcoin's Price Trend Under Three Interest Rate Scenarios?

Based on the above three plausible interest rate scenarios, we project the future price trend of Bitcoin:

1. Worst Case (Facing Rate Hike Risk in 2025-2026): Top Formed or Double Dip, Bearish Sentiment Dominant

· Price Projection: If the market confirms the existence of rate hike risk, Bitcoin will likely face selling pressure in Q2 2025 and beyond. The previous high may be the final peak of this cycle. Market sentiment will turn bearish, potentially leading to a deep retracement, testing key support levels below, and even the possibility of a double dip.

· Cycle Peak Assessment: It can be reasonably concluded that the peak has passed, with 2025 likely in a continuation of a downtrend or bottoming oscillation.

2. Base Case (Initiating Rate Cuts in the Second Half, Twice Throughout the Year): Patient Oscillation, Year-End Peak Zone Impact

· Price Projection: While waiting for clear rate cut signals in Q2-Q3, Bitcoin is likely to maintain a high-level wide swing. Market sentiment will fluctuate with data. Once rate cut expectations are confirmed at the end of Q3 or in Q4 and the first rate cut is implemented, it may trigger the final surge of the bull market. However, this is more likely a "last-minute" rally driven by sentiment and liquidity expectations.

· Cycle Peak Assessment: Possibly in Q4 2025 or early 2026, which partly aligns with some predictions of the halving cycle model. It is important to note that when the rate cut news is priced in, the market may have fully priced it in, leading to a "sell-the-fact" pullback. The real price peak may arrive when rate cut expectations are at their peak but not yet fully realized.

3. Best Case (Rate Cuts Starting Mid-Year, Three or More Throughout the Year): Bull Market Acceleration, Early and Potentially Higher Peak

· Price Projection: If an unexpected economic downturn forces the Fed to cut rates early, it will significantly boost market risk appetite. Bitcoin is expected to quickly break out of oscillation, launch a strong offensive, and drive the entire crypto market into a frenzy.

· Cycle Peak Assessment: Possibly as early as Q3 or early Q4 2025. Earlier arrival of liquidity easing may help push prices to higher levels, but the duration of the entire cycle will be shortened accordingly.

Four, Conclusion

The Fed's interest rate decisions remain the anchor of global asset pricing, especially for assets with high volatility such as Bitcoin. Although the market has been jokingly testing the lows, according to major mainstream institution forecasts, we are currently at a critical juncture of expectation swings. While reducing positions, perhaps a glimmer of hope can be retained.

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