Fed Rate Hike Expectations Slam Brakes on Bitcoin Rally

Bitcoin's recent rally towards $87,400 was halted by renewed expectations of a Federal Reserve rate hike, causing the price to slip back below $85,000.

The increase in rate hike probabilities, according to Fed Funds futures data, reignited risk aversion across financial markets, including tech equities and Bitcoin.

The relationship between US monetary policy and Bitcoin's price is well-documented: high-rate environments lead to capital outflows from risk assets like BTC into government bonds with attractive yields.

Traders should expect elevated volatility as long as rate uncertainty persists, and the next decisive catalyst will be the release of US inflation data (CPI), which could either confirm or undermine rate hike expectations.