The market is betting that rate cuts will continue into 2026, but the most aggressive analysts on Wall Street are already warning: if inflation makes a comeback, the Fed might slam on the brakes—or even shift gears and start raising rates again.

Sound exaggerated? Think back to the rate hike cycle in 2022, when BTC plummeted from $69,000 all the way down to $15,000. Countless accounts were cut in half, then halved again. More importantly, the market environment is completely different now—Bitcoin is no longer that fringe player acting alone.

The data speaks for itself. Over the past year, the correlation between BTC and the Nasdaq 100 surged to 46%, and it has a 42% correlation with the S&P 500. In plain English: Bitcoin is now behaving like a model student, keeping a close eye on the Fed’s every move. When the Fed signals a dovish stance, it takes off alongside tech stocks; when policy turns hawkish, it’s often the first to suffer. During the 2022 rate hike cycle, the correlation between Bitcoin’s price and interest rates hit -90% at one point—that number says it all.

To put it bluntly, liquidity is Bitcoin’s lifeblood, and the Fed controls the tap. The crypto market is like a machine that needs a constant infusion of funds; when the Fed cuts rates and injects liquidity, capital naturally flows into high-risk, high-return assets like Bitcoin. But if the tap is turned off—or worse, starts draining—the consequences are obvious.

Everyone’s betting on continued rate cuts right now, but don’t forget: the market never follows the script.