When everyone is betting on rate cuts in 2026, don't forget the lesson from 2022.

The market currently believes the Fed will continue to inject liquidity, but the boldest voices on Wall Street are already warning: what if inflation resurges? The Fed might not only hit the brakes but could even reverse and hike rates.

Sounds like fearmongering? Think back to 2022. Bitcoin plummeted from $69,000 all the way down to $15,000—a sight still etched in many account balances. What's worse, the rules of the game have changed—Bitcoin is now increasingly tied to traditional financial markets.

Bitcoin is no longer the lone wolf it once was

The numbers don't lie. Over the past year, the correlation between Bitcoin and the Nasdaq 100 surged to 46%, and its correlation with the S&P 500 is also at 42%. What does this mean? Bitcoin has gone from a rebellious outlier to an obedient student watching the Fed’s every move.

When the Fed signals dovishness, Bitcoin takes off alongside tech stocks; when the Fed turns hawkish, Bitcoin is often the first casualty. During the 2022 rate hikes, the correlation between Bitcoin prices and interest rates once hit -90%, a textbook case of inverse linkage.

Liquidity is Bitcoin’s lifeline

The crypto market is like an insatiable beast, surviving on liquidity. When the Fed cuts rates and injects liquidity, funds flood into high-risk, high-reward assets like Bitcoin; but once the tap is tightened