Bitcoin Slumps as Fed Hike Fuels Dollar Strength and Rate Expectations
Bitcoin has extended its decline following the Federal Reserve's decision to raise interest rates by 25 basis points, taking the benchmark range to 3.75% to 4.00%. This move has led to a stronger dollar and increased expectations of further tightening, putting pressure on risk assets like Bitcoin.
The Fed's first rate hike in more than three years has marked a significant shift in monetary policy, with markets now pricing in another 75 basis points of tightening over the next six months. The decision was largely expected, with more than a 90% probability assigned to a rate increase before the announcement.
As the dollar strengthens, it can compete with Bitcoin for capital, as investors often seek dollar-denominated assets when higher interest rates increase potential returns from the US bond market. This has led to a decline in demand for Bitcoin, with short-term selling pressure continuing across BTC.