The Fed Is Done Cutting Rates and Crypto Doesn't Care

For years, the crypto narrative went like this: Fed prints money, Bitcoin goes up. Fed tightens, Bitcoin goes down. Simple. Clean. Easy to trade.

It's not working anymore.

The Federal Reserve has made it pretty clear that rate cuts are done for now. After trimming rates three times in late 2024, the FOMC hit pause in early 2025 and hasn't moved since. Inflation is sticky above 2.5%. The labor market won't cool down. Jay Powell keeps saying "data dependent" which is Fed-speak for "we're not doing anything."

And Bitcoin? It's sitting around $68,000. Not crashing. Not panicking. Just... vibing.

The Old Playbook Is Dead

Let's look at history. In 2022, when the Fed started its aggressive rate hiking cycle, Bitcoin went from $47,000 to $16,000. The correlation between BTC and liquidity was almost perfect. More liquidity, higher prices. Less liquidity, lower prices.

In 2023, as rate hikes paused, Bitcoin bottomed and started recovering. In 2024, when the first rate cut hit in September, BTC rallied past $70,000.

So by the old logic, a pause in rate cuts should be bearish. Higher for longer rates mean tighter financial conditions, less risk appetite, more competition from yields on bonds and money market funds.

But BTC isn't following the script.

What Changed

Three things happened that broke the old correlation.

First, Bitcoin got institutional. When your marginal buyer is a pension fund making a strategic allocation, the overnight federal funds rate isn't the primary driver. These buyers aren't leveraged to the gills on DeFi protocols. They're not borrowing at the risk-free rate to buy crypto. They're carving out 1-2% of a diversified portfolio. Whether rates are at 4.5% or 5.5% doesn't fundamentally change that calculus.

Second, the Bitcoin ETF created structural demand. BlackRock, Fidelity, and the rest are pulling in billions regardless of Fed policy. The product exists now. Financial advisors are recommending it. Model portfolios include it. That demand isn't rate-sensitive in the way retail speculation is.

Third, Bitcoin's narrative shifted. It's not just a risk-on leveraged bet anymore. The "digital gold" framing has stuck, and it's attracting buyers who actually want an inflation hedge, a portfolio diversifier, a store of value that isn't correlated with traditional assets.

Look at what happened recently. US-Iran tensions spiked. Gold jumped. Bitcoin pushed toward $68,000. That's a safe-haven bid, not a risk-on trade. Five years ago, geopolitical fear would've cratered Bitcoin.

The Liquidity Argument Still Matters (Kind Of)

I don't want to overstate the decoupling. Global liquidity still matters for crypto. When central banks collectively tighten, it creates headwinds for all risk assets including Bitcoin. When they ease, it helps.

But Bitcoin's sensitivity to liquidity has decreased. It's gone from a high-beta liquidity play to something more nuanced. Think of it like tech stocks. Apple doesn't crash every time the 10-year yield ticks up. It used to. But as the company matured, generated massive cash flows, and became a core holding for every index fund, its correlation with rates weakened.

Bitcoin is going through a similar maturation. It's not there yet, but it's trending in that direction.

What the Market Is Actually Pricing

Here's what I think is really going on. The market has looked at the Fed's pause and concluded that while rates might stay high, they're not going higher. That's a subtle but critical distinction.

The worst case scenario for risk assets isn't high rates. It's rising rates. It's the uncertainty of not knowing where the top is. Once the market believes the hiking cycle is truly over, it can price around it. And that's what's happened.

Bitcoin already priced in the tighter regime. The bear market of 2022, the consolidation of 2023, those were the adjustment period. Now the market has adapted. Leverage has been flushed. Weak hands are gone. What's left are holders with longer time horizons and lower sensitivity to short-term rate moves.

The Dollar Factor

There's another angle people miss. Fed policy affects crypto not just through rates but through the dollar. When the Fed pauses, the dollar tends to weaken (less yield differential with other currencies). A weaker dollar is historically bullish for Bitcoin.

We've seen the DXY (Dollar Index) drift lower even as rates stay elevated. That's because other central banks are catching up with their own tightening cycles, narrowing the gap. This relative weakening of the dollar provides a tailwind for dollar-denominated assets like Bitcoin.

What to Watch Now

If you're still trading crypto based on FOMC meetings, you're watching the wrong variable. Here's what actually matters now:

Global liquidity, not just the Fed. The Bank of Japan, the People's Bank of China, the ECB. All of them affect the total pool of liquidity that crypto taps into. The BOJ's monetary policy might matter more for Bitcoin than the Fed's at this point.

ETF flows. Forget the dot plot. Watch BlackRock's daily flow data. That's the real demand signal.

Credit conditions. Are banks lending? Is the repo market functioning? Are there signs of stress? These matter more than the headline rate.

Stablecoin supply. USDT and USDC market caps are the best proxy for crypto-native liquidity. When stablecoin supply expands, money is entering the ecosystem. That's a more direct signal than anything Jay Powell says.

My Take

The Fed's irrelevance to crypto is overstated. It still matters. But its influence has gone from dominant to one-of-many. Bitcoin has found other demand drivers, institutional adoption, geopolitical hedging, sovereign accumulation, that operate on different timelines and different logic than the federal funds rate.

If you're waiting for rate cuts to buy Bitcoin, you might be waiting a while. And by the time they come, the move may have already happened. The smart money isn't waiting for permission from the Fed. It's already in.