Oil at $90 outweighs the Fed's "dovish" signal: why bitcoin keeps falling
The cryptocurrency market is once again showing a paradoxical reaction: the softening of the Federal Reserve's rhetoric, which should have supported risky assets, failed to keep bitcoin from declining. Instead of the expected growth, the first cryptocurrency continues to lose value, and the key reason for this, in my analysis, lies not in monetary policy but in the dynamics of the commodity market—specifically, in oil approaching the critical level of $90 per barrel.
At first glance, the macroeconomic backdrop was shaping up in favor of digital assets. Over the past week, the probability of a rate hike in September collapsed from 52% to 30%, the yield on two-year U.S. Treasury notes fell from 4.24% to 4.17%, and the dollar index corrected to the 99.5 level. All three indicators point to a loosening of financial conditions—exactly the environment in which cryptocurrencies usually feel most confident.
Why bitcoin ignores the positive
However, bitcoin is moving in the opposite direction, losing about $1,500 over the period in question—from $65,000 to $63,500. Such a reaction looks anomalously weak against such a noticeable shift in rate expectations. The answer, in my view, lies in the realm of geopolitical and commodity risks, which are now outweighing support from the monetary factor. Investors are clearly pricing in not so much future rate cuts as a potential inflationary shock from more expensive oil.
Oil as the main antagonist
The key trigger that I recommend the market watch is Brent approaching the psychological level of $90 per barrel. Historical experience shows that what is dangerous is not a short-term spike above this mark, but its persistence over a long period. If oil settles in the $90–$100 range, it will inevitably stoke inflation expectations and push bond yields higher, which would be a direct blow to all risky assets, including cryptocurrencies.
For now, five-year breakeven inflation expectations remain stable, hovering near 2.24%. But this calm could prove deceptive. If high oil prices persist, the market's "dovish" expectations regarding Fed actions will become extremely vulnerable, and the entire structure built on imminent policy easing will begin to crumble.
For bitcoin's short-term dynamics, I see two main scenarios. First: if oil falls and yields and the dollar continue to weaken, BTC will get a chance to make up for lost ground and resume growth amid improved liquidity. Second, more likely if current trends persist: expensive oil will trigger a rise in inflation expectations, and then bitcoin, along with Ethereum, will remain under pressure despite all the Fed's benign rhetoric.
My conclusion: the market is entering a phase where monetary stimulus is no longer a panacea. The commodity factor is becoming dominant, and traders should shift their focus from Fed statements to the dynamics of oil quotes—it is they that now determine risk appetite.