The geopolitical peace did not help Bitcoin: the hawkish Fed dictates the rules once again
Donald Trump signed a historic memorandum of understanding between the US and Iran, marking a major geopolitical event in recent years. However, the rally in risk assets proved short-lived. Bitcoin, which surged to $66,315 on the news of peace, failed to hold its positions and came under pressure again from macroeconomic factors. At the time of writing, the leading cryptocurrency is trading near $63,800, losing 2.80% over the past 24 hours.
A Peace That Didn't Work
The signed memorandum includes 14 key points aimed at ending hostilities and stabilizing the region. The agreement provides for verification mechanisms, partial lifting of sanctions, and a clear timeline for technical negotiations on Tehran's nuclear program. Pakistan, Qatar, Saudi Arabia, and Turkey played a mediating role. Trump called it "the art of the deal."
Markets reacted instantly: oil and gold moved into negative territory, while Bitcoin showed a short-term upward impulse. However, investor joy proved premature.
Fed's Hawkish Rhetoric: Crypto's Main Enemy
Immediately after the Federal Reserve's verdict was announced, Bitcoin's quotes headed downward. New Fed Chair Kevin Warsh held his first Federal Open Market Committee meeting on June 17. Following the meeting, the regulator left the key interest rate unchanged at 3.50–3.75% for the fourth consecutive time, but more importantly, any hints of possible policy easing in the foreseeable future disappeared from the official statement.
The shift to a neutral approach, entirely tied to fresh statistics, caught markets off guard. Moreover, 9 out of 18 Committee members now forecast at least one interest rate hike in 2026. This forecast is a dramatic departure from previous expert expectations, which had anticipated rate cuts or a prolonged pause.
The hawkish rhetoric confirms Citadel Securities' warnings about growing risks of a rate hike in September. Rising wages, sustained consumer activity, supply-side constraints, and record investments in artificial intelligence are keeping inflation at around 4.2% annually—well above the Fed's 2% target.
Markets in the Red: Bitcoin No Exception
Markets reacted instantly to the news. The S&P 500 index fell by 1.5%, the tech-heavy Nasdaq lost 2%, and the Dow Jones dropped 160 points. At the same time, government bond yields rose noticeably: the two-year yield increased by 11 basis points to 4.153%, and the ten-year yield rose by 12 basis points to 4.469%.
The cryptocurrency sector fully mirrored the movement of traditional markets, where a mass flight of investors from risky instruments was observed. Bitcoin could not withstand the pressure from the Federal Reserve. Not even the positive geopolitical backdrop of the Washington-Tehran agreement helped. At the time of writing, the market flagship is trading 4% below its weekly high of $67,203.
My analysis: The current situation clearly illustrates a crucial rule for all crypto investors. High-profile events on the global political stage can provide short-term support for the price, but in the medium term, the trajectory of Bitcoin and other risk assets is shaped by the central bank's monetary policy. As long as the Fed maintains a hawkish stance, any rally driven by geopolitics will be merely a temporary respite before renewed pressure.