Rate Hike Alert: Bitcoin Could Plummet 8% as Fed Tightens Monetary Policy

Crypto analyst Sherlock has heightened the probability of the Federal Reserve raising interest rates next week to approximately 90%. This development could put significant selling pressure on Bitcoin (BTC). According to data shared by Sherlock, the probability of a rate hike increased from 58.4% to 86.4% in just seven days.

Sherlock analyzed Bitcoin's performance after the 20 Federal Reserve interest rate hikes that have occurred since 2015. He found that Bitcoin generally doesn't react sharply on the day interest rate decisions are announced, but this initial reaction is often misleading.

In 11 out of 20 instances where rates were raised, BTC ended the day higher, but in 10 of those cases, it was trading below its price a month later. In all 20 examples, Bitcoin fell below its price on the day of the interest rate decision at some point during the following month-long period.

The median decline in price over this period was 9.3%. Sherlock noted that if BTC is around $78,000, a pullback of similar magnitude could take the price to approximately $70,700. He also pointed out that futures market pricing indicates there's a 72.6% probability interest rates will be at least 50 basis points above current levels in December.