The Federal Reserve raised interest rates for the first time since 2023 on Wednesday, resulting in significant volatility in the bitcoin price, albeit briefly. However, it has stabilised and is presently 1% higher over the past 24 hours. According to reports, bitcoin is unlikely to be affected by the Fed’s decision. “We believe yesterday’s move was a mid-cycle adjustment, not a cyclical change,” wrote Zach Pandl. “And we doubt the one or two rate hikes expected for 2026 will lead to much change in capital allocation.”
Bitcoin has historically performed well in a low interest rate environment, though this has not been a consistent trend. Historically, when the Federal Reserve has raised borrowing costs, the value of the leading digital asset has declined. That’s because low interest rates signify increased liquidity for investors, enabling them to take risks and acquire assets such as bitcoin. Pandl added that when the Fed in 2022 started ramping up interest rates to contain inflation, it “probably weighed on the price of bitcoin” because it “meaningfully affected the opportunity cost of holding non-interest-bearing assets.”
However, this period resembles 1997, as noted by Pandl, when the Federal Reserve implemented a singular rate increase and the Nasdaq continued its upward trajectory. Bitcoin’s price recently stood at close to $76,581, reflecting an increase of 18% over the past 30 days. The coin in August experienced a positive impact from reports indicating that the U.S. Treasury would at least double the scale of its liquidity-support buyback operations. The U.S. is presently facing an affordability crisis, with inflation adversely impacting households amid rising oil prices.
Federal Reserve Chair Kevin Warsh stated that the central bank is concentrating on reducing inflation. “The plain fact is that inflation is too high, and has been for too long,” he said on Wednesday. U.S. President Donald Trump has repeatedly said that he wants interest rates to be lower. Writing on his Truth Social platform on Wednesday, he said: “Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World – BY FAR.”
