The cryptocurrency market is once again showing a paradoxical reaction: the softening of the Federal Reserve's rhetoric, which should have been a powerful catalyst for risk assets, failed to keep bitcoin from declining. Instead of the expected growth, we are seeing further decline, and the key reason lies not in monetary policy, but in the dynamics of oil prices, approaching the critical mark of $90 per barrel.
Over the past week, the market has noticeably revised its expectations regarding the Fed's actions. The probability of a rate hike in September has collapsed from 52% to 30%, the yield on two-year Treasury bonds has fallen from 4.24% to 4.17%, and the dollar index has pulled back to the 99.5 level. All three indicators point to a softening of financial conditions—exactly the environment in which digital assets usually feel most confident.
However, bitcoin has gone against the trend, dropping from $65,000 to $63,500. Such a reaction looks anomalously weak against the backdrop of such a significant shift in rate expectations. The explanation is simple: geopolitical risks and the oil factor are now outweighing the positive from monetary easing, creating strong resistance for the growth of the crypto market.
Oil at $90—the main threat to the crypto market
The key factor that now needs to be closely monitored is Brent approaching the $90 per barrel mark. Historical experience shows that what is dangerous is not a brief spike above this level, but its sustained consolidation, which can fuel inflation expectations and push bond yields higher.
So far, there is no such signal—five-year breakeven inflation expectations remain stable at around 2.24%. But if oil consolidates above $90 or continues moving toward $100, all the market's "dovish" expectations regarding the Fed will become extremely vulnerable.
For the short-term dynamics of bitcoin, I see two scenarios. If oil becomes cheaper and the dollar and yields weaken further, BTC will get a chance to make up for lost ground amid improving financial conditions. However, if oil remains expensive and inflation expectations begin to rise, bitcoin and Ethereum will continue to be under pressure—despite all the favorable Fed rhetoric.
My expert conclusion: the market is entering a phase where traditional macroeconomic factors, such as energy commodities, are beginning to dominate over monetary stimuli. Investors should closely watch oil prices as a leading indicator for the crypto market—it is they, not Fed statements, that are currently determining the direction of movement.