Analysis of the Relationship Between Fed Interest Rate Policy and Bitcoin Price Movement

In the past decade, the bull market peaks and bear market lows of Bitcoin have shown a close correlation with the Fed's interest rate policy. Typically, Bitcoin's tops occur when the expectations for rate hikes are strongest, while bottoms are often accompanied by a shift in the expectations for rate cuts.

Currently, the market is facing three possible development paths:

1. Restarting interest rate hikes may lead to a second bottom.
2. Starting from the second half of the year, the interest rate cut may trigger a peak after a fluctuation.
3. The mid-year interest rate cut may accelerate the bull market process.

These different paths will determine the future direction of Bitcoin's price movement.

Review of the Fed's Ten-Year Interest Rate Policy and Its Impact on Bitcoin

Looking at the Fed policy cycles over the past decade, we can observe some interesting patterns:

1. The bull market peak of Bitcoin usually precedes actual interest rate hikes, reflecting the market's early reaction to tightening expectations.
2. The bear market lows of Bitcoin often occur in the later stages of interest rate hikes, during pauses in rate hikes, or just before the start of a rate cut cycle, reflecting the market's tendency to seek a bottom during periods of heightened pessimism or when expectations for easing emerge.
3. Quantitative easing or significant interest rate cuts, also known as "flooding the market" policies, are important factors driving the bull market.

Currently, we are in a "pause on interest rate hikes" and "short-term rate cut" plateau, with the market waiting for the next clear directional signal, especially focusing on whether we will enter a new round of quantitative easing.

Analysis of Three Interest Rate Scenarios Based on Institutional Predictions

According to the views of several mainstream research institutions, we can summarize three possible scenarios:

1. Worst case: Facing interest rate hike risks in 2025-2026

   • Some institutions warn that if employment and inflation data is unexpectedly strong, the possibility of discussing interest rate hikes within the year cannot be ruled out.
   • Tariff policies and geopolitical factors may raise inflation risks, forcing the Fed to maintain tight policies.

2. Baseline Scenario: Start interest rate cuts in the second half of the year, with two rate cuts throughout the year.

   • Most predictions suggest that the Fed will begin to cut interest rates after June, with two cuts throughout the year, bringing the year-end interest rate down to a range of 3.75%-4.00%.
   • This viewpoint suggests that although inflation has some stickiness, the overall trend is downward, and the economy and job market will gradually cool.

3. Best case scenario: Start interest rate cuts in the middle of the year, with three or more cuts throughout the year.

   • Some institutions expect the first rate cut to begin in June, with a total of three cuts (75 basis points) in 2025, bringing the year-end interest rate down to 3.50%-3.75%.
   • Market expectations show that a considerable proportion of investors are betting on 3-5 rate cuts throughout the year, reflecting an increasing anticipation for aggressive easing policies.

Prediction of Bitcoin Price Movement under Different Interest Rate Scenarios

Based on the three interest rate scenarios mentioned above, we can extrapolate the future price movement of Bitcoin:

1. Worst-case scenario (interest rate risk):

   • price movement: If the market confirms the existence of interest rate hike risks, Bitcoin may face selling pressure in the second quarter of 2025 and beyond, with previous highs potentially becoming the final peak of this cycle.
   • Cycle judgment: It is highly likely that the peak has been passed, and in 2025 it may be in a downward continuation or bottoming phase.

2. Benchmark Scenario (Starting Interest Rate Cuts in the Second Half):

   • price movement: The second and third quarters may maintain a high level of wide fluctuations. Once the interest rate cut expectations are confirmed and implemented at the end of the third quarter or in the fourth quarter, it may trigger the last wave of the bull market.
   • Cycle Judgment: The peak may occur in the fourth quarter of 2025 or early 2026, which is consistent with some halving cycle models.

3. Best case scenario (rate cuts start mid-year):

   • price movement: If the Fed lowers interest rates ahead of schedule, it will greatly boost market risk appetite. Bitcoin may quickly break through the consolidation range, driving the entire cryptocurrency market into a frenzy.
   • Cycle assessment: The peak may arrive earlier in the third quarter or early fourth quarter of 2025, with prices expected to reach higher levels, but the duration of the entire cycle may correspondingly shorten.

Despite the current market sentiment fluctuating, according to predictions from mainstream institutions, we are still in a key period of uncertain expectations. When adjusting investment strategies, it may be necessary to maintain a certain level of cautious optimism.