Bitcoin has been fluctuating between $50,000 and $70,000 for several months. With the block reward halving completed, the next major narrative hinges on Federal Reserve rate cuts.
According to CME FedWatch data, the likelihood of a Fed rate cut by September 24 has reached 100%, with equal probabilities for 25 or 50 basis point reductions. But will this spur a crypto market rally? This article revisits five Fed rate-cut cycles (1989–2019) to uncover historical patterns.
2018–2020: Bitcoin's First Rate-Cut Cycle
The Fed's last hike occurred on December 19, 2018, followed by the first cut on July 31, 2019. Key observations:
- Bitcoin surged 161.7% between the final hike and first cut, outperforming Nasdaq (+23.2%) and gold (+13.7%).
- Post-cut, Bitcoin entered sideways volatility while stocks/gold continued rising.
- The 2021 bull run was fueled by pandemic-era quantitative easing (QE), not the cuts themselves.
2023 Parallel: Since the last hike (July 27, 2023), Bitcoin rose 122.6%, again eclipsing Nasdaq (+19.4%) and gold (+27%).
1989–2008: Pre-Bitcoin Eras
2006–2008: Hard Landing (Subprime Crisis)
- Actions: Final hike (June 2006, 5.25%) → First cut (September 2007, 4.75%) → Final cut (December 2008, 0%).
- Impact: Nasdaq rose pre-cut, collapsed during crisis, rebounded post-QE. Gold climbed steadily.
- Context: BTC emerged amid financial collapse.
2000–2003: Dot-Com Crash
- Actions: Last hike (May 2000, 6.5%) → First cut (January 2001, 6%) → Final cut (June 2003, 1%).
- Impact: Nasdaq peaked pre-crash, bottomed in 2002, recovered by 2004. Gold rose post-cut.
1995 & 1989: Soft Landings
- 1995: Short-lived cuts; stocks/gold diverged (tech boom).
- 1989: Prolonged cuts; stocks stagnated while gold stabilized.
Key Conclusions
- Rate cuts are typically priced in early—Bitcoin often leads gains pre-cut.
- Economic context dictates outcomes: Hard landings (e.g., 2008) see volatile recoveries; soft landings lack sustained rallies.
- Gold generally benefits from lower rates/weaker USD.
- Bitcoin needs beyond macro policy: Post-2024 halving, new catalysts (e.g., institutional adoption) are critical.
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FAQ
Q: Do rate cuts guarantee crypto bull markets?
A: No—historical gains precede cuts; post-cut performance depends on broader liquidity (e.g., QE).
Q: How does Bitcoin compare to stocks during cuts?
A: BTC often outperforms pre-cut but shows higher volatility afterward.
Q: Why did gold rise consistently?
A: As a non-yielding asset, gold thrives when real interest rates fall.
Data sourced from CME FedWatch and historical Fed statements.
**Notes**:
- Removed promotional links/author credits per guidelines.