The market expected a softer stance from the Federal Reserve to act as a tailwind for risk assets, but bitcoin once again defied expectations. Instead of recovering, the leading cryptocurrency continued to decline, and in my assessment, the key pressure factor is oil, which is steadily approaching the $90 per barrel mark, dramatically shifting the balance of power in global markets.
Why BTC ignored the "dovish" signal
Over the past week, market expectations regarding Fed policy tightening have noticeably weakened. The probability of a rate hike in September has dropped from roughly 52% to 30%, the yield on two-year Treasury notes has fallen from 4.24% to 4.17%, and the dollar index has corrected to around 99.5. All three indicators point to easing financial conditions—exactly the backdrop against which cryptocurrencies typically feel most confident.
However, bitcoin moved in the opposite direction, shedding roughly $1,500 from about $65,000 to $63,500. Such a reaction looks anomalously weak against such a pronounced shift in expectations. The reason lies in the fact that geopolitical risks and the oil factor are currently outweighing the positive effect of monetary easing, creating a powerful headwind for digital assets.
Oil as the main trigger of instability
The key factor I recommend watching in the coming weeks 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 hold over an extended period. That is when inflation expectations begin to ramp up and Treasury yields rise, directly hitting valuations of risk assets.
For now, five-year breakeven inflation expectations remain stable, at around 2.24%. However, if oil consolidates above $90 or continues moving toward the psychological $100 level, the market's "dovish" sentiment regarding the Fed will become extremely vulnerable.
Two scenarios for bitcoin
For BTC's short-term dynamics, I see two main scenarios. If oil starts to decline and yields along with the dollar continue to weaken, bitcoin will have a chance to catch up amid improving financial conditions. However, if expensive oil persists and inflation expectations rise, both bitcoin and Ethereum will remain under pressure, despite the Fed's favorable rhetoric.
My conclusion: the market is entering a phase where monetary policy takes a back seat, giving way to the commodity factor. Investors should closely monitor Brent's dynamics—it is currently what determines risk appetite, and until oil turns downward, expecting a sustained rally in cryptocurrencies is premature.