Fed Rate Hike Squeezes Bitcoin as Dollar Strength and Tightening Expectations Bite
The Federal Reserve's decision to raise interest rates by 25 basis points has led to a decline in Bitcoin, with prices falling over 3% in three trading days.
The stronger US dollar and expectations of further tightening have put pressure on risk assets, including BTC. The increase marked the Fed's first rate hike in more than three years, taking the benchmark range to 3.75% to 4.00%. Markets now price in another 75 basis points of tightening over the next six months.
Before the decision, markets assigned a high probability to a rate increase, reflecting expectations for a more aggressive policy stance from the central bank. Higher US rates can increase demand for bonds and support the dollar, while tighter financial conditions can reduce liquidity available for risk assets.