The market expected the Federal Reserve's "dovish" pivot to be a tailwind for risk assets, but Bitcoin once again demonstrated its unpredictability. Instead of the anticipated rally, the leading cryptocurrency continued to decline, and the key reason lies not in monetary policy but in commodity markets.
The Paradox of Bitcoin's Reaction
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 dropped to the 99.5 level. All three indicators are a classic signal of easing financial conditions, which historically serves as a powerful catalyst for cryptocurrencies. However, BTC reacted sluggishly, falling from $65,000 to $63,500.
This divergence is explained by the fact that geopolitical risks and the price shock in the energy market outweigh the positive effect of monetary easing. Investors, who typically increase positions in risk assets when liquidity improves, are now forced to account for inflationary pressure emanating from the commodity sector.
Oil at $90 — The Main Antagonist
The key factor I am closely monitoring right now is Brent approaching the psychological level of $90 per barrel. History shows that what is dangerous is not a short-term spike above this mark, but its persistence over an extended period. This is precisely what can stoke inflation expectations and push bond yields higher, negating all of the Fed's efforts.
For now, five-year inflation expectations remain stable at 2.24%, giving the market some breathing room. But if oil consolidates above $90 or heads toward $100, the Fed's "dovish" scenario will be under threat, and the entire structure of risk assets will begin to crack at the seams.
For Bitcoin, I see two scenarios. In the case of cheaper oil and continued weakness in the dollar and yields, BTC will have a chance to make up for lost ground and resume its upward trend. However, if energy prices remain high and inflation expectations begin to creep upward, Bitcoin and Ethereum will continue to face pressure — even despite the Fed's favorable rhetoric.
My view: the current situation is a reminder that in 2024, the crypto market no longer lives in a vacuum. The macroeconomic picture has become more complex, and now oil, not just Fed rates, determines risk appetite. Investors should closely watch Brent's dynamics: this indicator could become more significant for Bitcoin than Federal Reserve meetings.