The Fed and Bitcoin: understanding the macro link
The Federal Reserve (Fed) is the central bank of the United States. It sets benchmark rates — the cost at which banks lend money to each other — with the goal of controlling inflation and maintaining full employment. These decisions ripple across global financial markets, including Bitcoin.
How rates influence Bitcoin
The mechanism is indirect but documented. When the Fed raises rates, the yield on risk-free investments (government bonds, savings accounts) increases. Investors arbitrage in favour of these assets at the expense of risky assets like growth stocks or Bitcoin. Conversely, when the Fed cuts rates, the opportunity cost of holding Bitcoin — an asset that pays no yield — decreases, making it relatively more attractive.
This relationship is not mechanical. The 30-day correlation between Bitcoin and the S&P 500 has historically ranged between 0.1 and 0.8 depending on market stress periods. In 2024-2025, the arrival of spot Bitcoin ETFs partially decoupled Bitcoin from rate cycles by creating structural institutional demand independent of monetary conditions.
The 2022-2025 rate cycle
Between March 2022 and July 2023, the Fed raised rates from 0% to 5.25-5.50% — the fastest tightening cycle since the 1980s. Bitcoin fell from $47,000 in March 2022 to a low of $15,500 in November 2022, a 67% decline. This correction reflected both monetary tightening and the collapse of the crypto ecosystem (Terra/Luna, FTX).
The Fed began its easing cycle in September 2024 with an initial 50 basis point cut, followed by additional cuts in 2025. Bitcoin reached a new all-time high of $109,000 in January 2025, driven by the combination of monetary easing and spot ETF approval.
The FOMC and the dot plot
The Federal Open Market Committee (FOMC) — the Fed's monetary policy committee — meets 8 times per year. Each meeting produces a rate decision and a Summary of Economic Projections including the "dot plot" — a chart showing each FOMC member's individual projections for future rate levels. This document is closely watched by financial markets as it signals the future rate trajectory.
What the data does not tell us
A rate cut does not guarantee a Bitcoin rally. In March 2020, during the last major emergency rate cut, Bitcoin first fell 50% within days before recovering. The broader macroeconomic context, market liquidity and investor sentiment play an equally important role as Fed decisions.
BTCMACRO monitors every FOMC meeting and publishes an analysis of the impact on Bitcoin in the hours following the decision.