Interest rate hikes by the U.S. Federal Reserve often has consequences for financial markets. Stock prices tend to suffer, and the crypto market also usually follows suit. However, BitMEX founder Arthur Hayes believed that the correlation between interest rate hikes and the price of Bitcoin was currently uncorrelated.
Speaking at a keynote at the Korea Blockchain Week in Seoul, South Korea, Hayes said that the opposite is happening compared to previous rate hike cycles. Hayes stated, “It’s different than what’s happened before. The standard playbook is starting to break down.”
Comparing Bitcoin (BTC) prices and interest rate hikes since 2022 end
Hayes’ views are clearly visible in the lack of movement in Bitcoin’s (BTC) price over the last few interest rate hikes. Of the last five interest rate hikes, BTC’s price only fell after the May announcement, by roughly 5.5%. However, the price recovered soon after. Apart from that, BTC’s price has remained steady despite the Fed’s monetary policies.
In fact, this year, it was the hype around the spot Bitcoin (BTC) ETF (Exchange Traded Fund) that was responsible for all the noise in the crypto markets. Even the latest drawdown is attributed to the SEC’s (Securities and Exchange Commission) delay in making a decision in this regard.
In his speech, Hayes noted that increasing financial asset prices can increase capital gains taxes and government revenue. However, when the Federal Reserve raises interest rates, prices can stagnate, reducing government revenue. Hayes argued that,
“The resulting interest payments to the wealthy stimulate spending and nominal GDP growth, creating a paradox where the Fed’s rate hikes inadvertently fuel economic growth.”