[Analysis] Bitcoin Bear Market Hard to Call on U.S., Japan Rate Hikes Alone
Summary
- Murphy said rate hikes in the United States and Japan alone are not enough to predict a Bitcoin bear market.
- He said the key variables are the pace of tightening, Bitcoin itself, and the size and frequency of rate hikes.
- Murphy said Bitcoin is unlikely to reenter a bear market unless markets begin to expect a new rate-hike cycle beyond increases of around 25 basis points.
Forecast Trend Report by Period
Recent rate hikes in the United States and Japan have revived debate over Bitcoin's outlook, but those moves alone are not enough to call a bear market for the cryptocurrency, digital-asset analyst Murphy said.
Writing on X, formerly Twitter, on September 18, Murphy said past cases show that rate hikes alone do not adequately explain Bitcoin's price trajectory. The two variables that matter most, he wrote, are the pace of monetary tightening and Bitcoin's own market conditions.
He pointed to 2022 and 2023 as representative examples. In 2022, the Federal Reserve delivered a cumulative 425 basis points of rate increases, including four consecutive 75-basis-point "giant step" hikes from June through November. Over that period, Bitcoin fell from about $41,000 at the time of the first rate increase to a yearly low of $15,800.
In 2023, by contrast, rates were raised four times by 25 basis points each, while Bitcoin climbed from about $16,500 at the start of the year to about $42,000 by year-end. During the period from December 2015 to December 2017, when rates were raised five times by 25 basis points each, Bitcoin also surged from about $454 to $16,515.
Murphy said that in 2023, inflation was easing and the size of rate hikes had slowed from 75 basis points to 25 basis points, prompting markets to price in the end of the tightening cycle in advance. By that point, Bitcoin had already gone through a bear market and ownership had been sufficiently reshuffled. He added that the current structure of Bitcoin holdings looks much closer to early 2023 than to 2022.
The key remaining variables, he wrote, are the frequency and size of future rate increases. If each increase is limited to around 25 basis points and expectations for a new rate-hike cycle do not take hold, Bitcoin is unlikely to fall back into a bear market. He added, however, that the pace of the current upcycle could slow, and said moving slowly can sometimes be the fastest way forward.
Uk Jin
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