[Analysis] Bitcoin's Bear Market Hard to Predict from Interest Rate Hikes Alone

Recent interest rate hikes in the U.S. and Japan have materialized, but analysts say it is difficult to predict a bear market for Bitcoin (BTC) based solely on this factor.

On August 18, digital asset analyst Murphy posted on X (formerly Twitter), stating that historical cases show interest rate hikes alone cannot sufficiently explain Bitcoin's price movements. He emphasized two key variables: 'the pace of tightening' and 'Bitcoin itself.'

He cited 2022 and 2023 as representative examples. In 2022, the U.S. Federal Reserve raised rates by a total of 425bp (1bp = 0.01 percentage points), implementing four consecutive 75bp 'jumbo steps' from June to November. During this period, Bitcoin fell from around $41,000 at the first rate hike to $15,800 by year-end.

Conversely, in 2023, rates rose four times by 25bp each, while Bitcoin surged from approximately $16,500 at the start of the year to around $42,000 by year-end. Similarly, during a period from December 2015 to December 2017 when rates were raised five times by 25bp, Bitcoin rose from about $454 to $16,515.

Analyst Murphy noted that in 2023, slowing inflation and reduced rate hike sizes—from 75bp to 25bp—led the market to anticipate an end to rate hikes. At that time, Bitcoin also experienced a bear market with sufficient price correction before rebounding. He added that current Bitcoin holdings structure is quite similar to early 2023.

He stated the key remaining variable is the frequency and scale of future rate hikes. If the pace remains at 25bp per move without entering a new cycle of rate increases, he believes Bitcoin will not return to a bear market. However, he cautioned that the speed of an upcycle might slow down, noting that 'sometimes moving slowly can be faster than moving quickly.'