Why the Federal Reserve (FED) lowering interest rates is often a positive signal for Bitcoin.
1. Cheaper money → Cash flows into risky assets
• When the FED lowers interest rates, the cost of borrowing money decreases.
• Investors are less attracted to “safe” assets like bonds (low interest rates), so they will turn to riskier assets with higher returns such as:
• Technology stocks
• Gold
• And Bitcoin
• Result: Cash flows into the crypto market → prices increase.
2. Inflation concerns → Bitcoin is the “digital gold”
• Low interest rates increase the money supply and pose a risk of inflation.
• Bitcoin has a limited supply (21 million BTC) → becomes a “hedge against inflation” like gold.
• Many large investors view BTC as a “store of value” during periods of currency devaluation.
3. Signals of monetary policy easing → Positive market sentiment
• The FED lowering interest rates is often accompanied by signals supporting economic growth, reducing financial pressure.
• This increases optimism, boosting risk-taking investment sentiment, especially in crypto.
4. Bitcoin reacts strongly to expectations, not just actions
• The crypto market often reacts even before interest rates actually decrease.
• Just the FED hinting at lowering interest rates (dovish tone) → Bitcoin can already rise sharply due to investor expectations.
Real-world examples:
• During major interest rate cuts (2019, 2020, 2023), BTC prices rose sharply in the months that followed.
• March 2020: FED lowered interest rates to 0% → BTC increased from ~$5,000 to ~$60,000 within a year.
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