The Future of Bitcoin with Rising Interest Rates in the US

The US central bank – Federal Reserve, announced the interest rate hike in the country by 0.25 percentage point on Wednesday (16). It was the first rate hike in the US since 2018. In contrast, the cryptocurrency market reacted “positive” to the news.

Since the day of the rate hike announcement, bitcoin has risen from $39,000 to about $42,000. Since the beginning of this year, the bitcoin fluctuates between US$35,000 and US$45,000, while maintaining a “lateralization” movement, i.e. with volatility.

in spite of the bitcoin highsentiment indicators still point to the pessimism in the market

Will Bitcoin Fall If US Interest Rates Rise?

Before the rate hike started – already expected by investors, the stories in the ecosystem were about the possible crypto market crash

Classical move of the economy, rate hikes to contain inflation and asset prices – investors stop investing in variable income. On the other hand, if we talk about deflationary assets such as: bitcointhis correlation tends to break down.

Note that in period from 2017 to 2018, interest rates started to rise in the US, but with this move the price of bitcoin followed in 2017 and early 2018. However, during that period, bitcoin was in the big bull cycle of 2017.

Chart US01Y - 1-Year US Bonds.  Source: TradingView
Chart US01Y – 1-Year US Bonds. Source: TradingView

From this perspective, the correlation between interest rates and bitcoin tends to break down when bitcoin is in a bullish cycle. Nevertheless, some analysts predict bitcoin’s high for this year even with the rise in interest rates, due to the actions of central banks that have generated inflation not seen in 40 years.

It is worth remembering that the bitcoin continues in bullish cycle – the largest in time – this unique move, never seen in all 13 years of the digital asset’s life. According to some interesting factors that occurred after 2020.

For example, the entry of institutions, the mass adoption of cryptocurrencies, monetary policy (inflation), among others.

Bitcoin is on the rise, but the market remains pessimistic.

One of the most popular indicators of crypto market sentiment, Fear and Greed Index, is in the territory of “fear” this Saturday (19). For the past week, however, it was still in the zone of “extreme fear

Index of fear and greed
Index of fear and greed
So market sentiment does not show euphoria by this view. In addition, famous investors in the ecosystem such as Robert Kiyosaki are beginning to discredit digital assets, stating in the latest statement on bitcoin that all cryptocurrencies are confiscated.

Bitcoin volatility at highest level since May 2021

Bitcoin’s volatility started to rise sharply in the past month, a move that hasn’t happened since May 2021, from this perspective there are signs of price swings for the coming weeks.

Bitcoin volatility.  source: messari
Bitcoin volatility. source: messari

Finally, despite the pessimism in the market, the price of bitcoin remains signaling a prolonged rallymaintaining the tendency to “clean up” market exaggerations (liquidations) and high volatility.

Source: Live Coins

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