Markets now assign high probability to a Federal Reserve rate increase by year-end, a scenario unseen since 2023 and historically bearish for Bitcoin.
Bond traders have repriced Federal Reserve policy expectations, now pricing a 75 basis points rate hike as likely by December. This marks the first tightening signal since 2023 and introduces a rare risk for Bitcoin, which lost 65% during the last hiking cycle.
The shift follows persistent inflation above the Fed’s 2% target, rising oil prices after the Iran ceasefire collapse, and sustained AI-driven economic stimulus. June’s cooling inflation print offered only temporary relief before hike bets reaccelerated, with Bloomberg’s rate outlook reflecting near-certainty by December.
Bitcoin fell from $45,000 to $15,500 during the Fed’s 2022-2023 tightening cycle, though the same period also established its cycle bottom. A fresh hike would test Bitcoin’s resilience amid tighter financial conditions.