The Federal Reserve implemented its first interest rate hike since 2023 on Wednesday, causing the price of bitcoin to fluctuate wildly for a brief moment.
The market eventually stabilized, and bitcoin is currently trading roughly 1% higher over a 24-hour window.
Grayscale’s crypto research division suggests that the cryptocurrency will likely remain unfazed by the central bank’s choice.
Zach Pandl, the firm’s head of research, stated in a Thursday note, “We believe yesterday’s move was a mid-cycle adjustment, not a cyclical change.”
Pandl added, “And we doubt the one or two rate hikes expected for 2026 will lead to much change in capital allocation.”
While not a constant rule, bitcoin has historically performed well when interest rates are low. Conversely, previous increases in borrowing costs by the Federal Reserve have often triggered declines in the price of the top digital asset.
This correlation exists because low interest rates provide investors with greater liquidity to assume risks and purchase assets like bitcoin.
Pandl noted that when the Fed began raising interest rates in 2022 to fight inflation, the action “probably weighed on the price of bitcoin” by “meaningfully affected the opportunity cost of holding non-interest-bearing assets.”
However, Pandl compared the current climate to 1997, a period when the Federal Reserve executed a single rate hike while the Nasdaq continued to climb.
Recently, bitcoin traded near $76,581, marking an 18% increase over the trailing 30 days. In August, the cryptocurrency gained momentum following an announcement that the U.S. Treasury planned to at least double the size of its liquidity-support buyback operations.
At present, the United States faces an affordability crisis, with surging oil prices and inflation placing a heavy burden on households.
Federal Reserve Chair Kevin Warsh emphasized that the central bank’s primary priority is lowering inflation.
On Wednesday, he remarked, “The plain fact is that inflation is too high, and has been for too long.”
Meanwhile, U.S. President Donald Trump has consistently voiced his preference for lower interest rates. Following Wednesday’s events, he posted on Truth Social, “Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World — BY FAR.”
Frequently Asked Questions
How did bitcoin react to the Federal Reserve’s interest rate hike?
The bitcoin price fluctuated wildly at first following the Wednesday announcement, but it soon settled and held a modest 1% gain over a 24-hour period.
Why does Grayscale believe the rate hike won’t impact bitcoin?
Grayscale views the recent action as a mid-cycle adjustment rather than a cyclical change, noting that expected future rate hikes are unlikely to alter capital allocation significantly.
What was bitcoin’s price and recent performance?
Bitcoin’s price recently hovered near $76,581, reflecting an 18% increase over a 30-day period.
How have past rate hikes affected bitcoin?
In the past, rising borrowing costs have often pushed bitcoin’s price downward because higher rates increase the opportunity cost of holding non-interest-bearing assets and reduce investor liquidity.
