Rate Hikes Alone Won't Trigger Next Bitcoin Bear Market

Rate hikes in the U.S. and Japan have sparked debate about Bitcoin's outlook, but digital-asset analyst Murphy says they're not enough to call a bear market for the cryptocurrency alone.

Murphy notes that past cases show rate hikes don't adequately explain Bitcoin's price trajectory. He points to 2022 and 2023 as representative examples: in 2022, the Federal Reserve delivered 425 basis points of rate increases, including four consecutive 75-basis-point hikes, while Bitcoin fell from $41,000 to a yearly low of $15,800.

However, in 2023, rates were raised by 25 basis points each time, and Bitcoin climbed from $16,500 at the start of the year to about $42,000 by year-end. Murphy attributes this difference to easing inflation and the slowdown in rate hikes, which prompted markets to price in the end of the tightening cycle.

The key remaining variables are the frequency and size of future rate increases. If each increase is limited to around 25 basis points and expectations for a new rate-hike cycle don't take hold, Bitcoin is unlikely to fall back into a bear market.