What If Bitcoin Isn’t Reacting to the Fed at All?

In its latest weekly market commentary, Binance Research offered an interesting take on how Bitcoin’s price relates to macro trends in the US economy. Here’s how their argument goes:

• the market has sharply repriced expectations for Fed rates,
• this is affecting BTC,
• and although since the launch of spot ETFs two years ago BTC’s correlation with the global easing index has turned negative,
• this is interpreted as a sign that the market is starting to price in macro conditions in advance (i.e., those expectations are already reflected in Bitcoin’s price).

There was a time when I thought considering the BTC/USD rate as the price of Bitcoin was fundamentally misleading. If that number depends on the words, intentions, and actions of US financial authorities, then it cannot really be Bitcoin’s price. Those factors may affect the US dollar - but not Bitcoin.

So it makes more sense to view that rate as the price of the dollar, as seen by the crypto market.

When the Fed cuts rates, the dollar becomes less attractive in the crypto world, and its price falls (rather than Bitcoin’s price rising).
When the Fed raises rates, the dollar is perceived as more valuable, and its price rises (rather than Bitcoin’s price falling).

This view is supported by the fact that BTC/USD usually moves in sync with ETH/USD, SOL/USD, and many other cryptocurrencies - even memecoins. These assets are fundamentally different, yet their "prices" rise and fall together. How can that be?

The explanation is simple: it’s not their prices that are moving - it’s the price of the dollar within the crypto ecosystem.

But about two and a half years ago (and in my subjective view, this shift actually started before Bitcoin ETFs appeared), Bitcoin’s correlation with Fed signals seemed to break down. At that point, I thought my earlier interpretation was no longer valid - that BTC/USD had stopped reflecting changes in the market value of the dollar.

But what if Binance Research is right? What if the price still depends on Fed policy - only now it reflects those expectations in advance, like mature markets typically do?

If this is really a dollar price, then perhaps we should present it differently: not as how many dollars you get for a Bitcoin that has "gone up," but as how many bitcoins you get for a dollar that has "gone down" in the crypto market.

On rabbit.io, you can always see this perspective in practice when you exchange dollar-denominated stablecoins for Bitcoin.