Fed minutes flip Bitcoin’s rate-cut bet into hawkish risk

Federal Reserve minutes from the April meeting, released Wednesday, show a majority of policymakers favoring further tightening if inflation remains above the Fed’s 2% target. The committee left the federal funds rate at 3.50%–3.75% and recorded four dissents, the most since 1992.

A growing group of officials wanted to remove language that suggested rate cuts were likely. At the start of the year, futures traders priced two or more cuts before year-end; by May 20, CME FedWatch showed a 54.1% probability of a rate hike by December and a 1.5% chance of easing.

The shift in expectations affects liquidity and dollar strength. When markets expect cuts, borrowing costs tend to fall and the dollar can weaken, supporting risk assets. When market pricing tilts toward hikes, yields and the dollar often rise and financial conditions tighten.

Inflation and geopolitics contributed to the reassessment. April consumer price inflation was 3.8%, above the 2% goal, and an escalation in Iran pushed oil above $110 per barrel. Several Fed participants who had treated supply shocks as temporary indicated they were less willing to look through higher readings as the situation extended.

The 10-year Treasury yield reached 4.54% on May 15, a 12-month high, making government bonds more attractive relative to non-yielding assets. The week of May 15 saw nearly $1 billion in outflows from spot Bitcoin exchange-traded funds, ending a six-week inflow streak.

Spot Bitcoin ETFs have increased the cryptocurrency’s correlation with broader markets by allowing it to trade in the same brokerage accounts as equities and bond funds. That structure enables institutional allocators to adjust Bitcoin exposure with the same tools they use for other assets.

Analysts at a major cryptocurrency exchange wrote that a sustained expansion in Bitcoin’s price range would likely require either a clear improvement in systemic liquidity or a sustained downward trend in inflation. The Fed minutes indicated that neither condition was visible at the time of the meeting.

Historical precedent illustrates potential market effects: during the 2022 hiking cycle, the funds rate rose from near zero to above 5% and Bitcoin fell from about $69,000 to roughly $15,500. A prolonged period of elevated rates would present a different market environment than the cut expectations prevailing earlier in the year.

Incoming Federal Reserve Chair Kevin Warsh is set to take over from Jerome Powell. The minutes did not deliver an immediate rate increase but shifted the balance of market odds away from cuts and toward possible future hikes.

As of May 20, Bitcoin traded around $77,300, roughly 38.7% below its October 2025 all-time high. The Fed minutes altered the risk backdrop that had supported Bitcoin’s earlier rate-cut narrative.