Fed Policy Shift Sends Bitcoin Tumbling Towards Rate Hike Threshold
Nine months ago, market bets were on four rate cuts by mid-2027; however, the baseline scenario has now shifted to four rate hikes. This change in expectations is causing volatility in Bitcoin's price action, with traders initially betting on the U.S. Treasury stepping in to reshape liquidity.
Since the beginning of this year, Bitcoin has been trading amid repeated swings in macroeconomic expectations. The interest rate trajectory has become the primary variable for short-term pricing. Over the past month, Bitcoin has accumulated a gain of approximately 20%.
Billionaire Stanley Druckenmiller, closely tied to current Fed Chair Kevin Warsh, was reportedly quoted as saying rate cuts are 'no longer necessary.' This remark drew attention due to his high profile and close ties to Washington's core monetary policy circle. The market watches him essentially to observe the interplay of three forces: the White House desires rate cuts, the bond market seeks stable long-end yields, and the Fed aims to control inflation.
The past month's Bitcoin rally stemmed mainly from oversold recovery and liquidity speculation surrounding Treasury-related trades; now that hopes for rate cuts have faded, whether this gain holds depends on this week's policy meeting results. The magnitude of expectation shifts is striking macro traders as a 'weather change.'