Crypto & TokensExplainer
How do interest rates affect bitcoin?
Fed rate moves can change how attractive bitcoin looks next to safe, interest-paying assets. See the channels and what 2022–2025 showed about the link.
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Quick answer
Higher interest rates raise the return on safe assets such as Treasury bills, while bitcoin pays nothing, so holding it costs more in forgone interest. Rate moves can also shift appetite for riskier assets. The link is loose: in 2023 the Fed raised rates and bitcoin rose about 156%.
Key points
- Changing its target for the federal funds rate is the Fed's primary means of adjusting monetary policy, and short-term rates such as Treasury bill yields typically move closely with it.
- Bitcoin itself pays no interest or dividends; its value comes only from supply and demand, so higher safe yields raise the cost of holding it.
- The Fed says lower rates can make holding stocks more attractive; IMF economists found bitcoin moving more in step with stocks in 2020–21.
- In 2022 the Fed raised its target seven times and bitcoin fell about 64%, but in 2023 rates rose again and bitcoin climbed about 156%.
- Rates are one influence among many; they do not let anyone predict bitcoin's price.
What interest rate are people talking about?#
When headlines link bitcoin to "rates", the rate in question is the federal funds rate set by the Federal Reserve. The Fed calls changing its target for the federal funds rate the FOMC's primary means of adjusting the stance of monetary policy[1]. The federal funds rate is the interest rate that banks pay to borrow reserve balances overnight[1].
That overnight rate spreads to other borrowing costs. The Fed notes that rates of return on commercial paper and U.S. Treasury bills typically move closely with the federal funds rate[1]. Rates on longer-term loans are related to expectations of how policy and the economy will evolve, not just to today's federal funds rate[1]. For the full mechanics, see how the Federal Reserve sets interest rates.
The latest decision before this note was written was a rate increase. On September 16, 2026, the Committee decided to raise the target range by 1/4 percentage point to 3-3/4 to 4 percent, by a 12–0 vote, saying inflation remains elevated[2].
Why would a rate change matter for bitcoin at all?#
Bitcoin has no interest, coupon or dividend. The CFTC notes that the value of virtual currencies is completely derived by market forces of supply and demand[3]. So any reason that changes how many people want to hold bitcoin, at what price, can move it. Interest rates affect that demand through a few channels.
How a Fed rate change can reach bitcoin's price
1. The cost of holding a non-yielding asset. When safe yields are near zero, holding bitcoin instead of cash costs little in lost interest. When safe yields are higher, the gap widens. For example, if a safe account paid 4% a year, keeping $10,000 in bitcoin instead would give up $400 of interest over the year — before any gain or loss on the price.
2. Appetite for riskier assets. The Fed explains that changes in interest rates tend to affect stock prices by changing the relative attractiveness of equity as an investment, and that lower interest rates can make holding equities more attractive[1]. The Fed says this about stocks, not bitcoin. But IMF economists found that bitcoin's correlation with the S&P 500 rose from 0.01 in 2017–19 to 0.36 in 2020–21[4], so forces that move stocks have increasingly shown up in bitcoin too.
3. Real rates and inflation. What matters for savers is the rate after inflation. The real interest rate equals the nominal interest rate minus the inflation rate[5]. In September 2026 the top of the Fed's target range was 4.00% and 12-month CPI inflation was 3.7%, a real policy rate of about 0.3 percentage points by simple subtraction.
What happened to bitcoin when the Fed raised rates in 2022?#
Start with 2022. The upper limit of the Fed's target range was 0.25% at the end of 2021 and was changed seven times during 2022, reaching 4.50% on December 15[6]. Bitcoin's price fell about 64% over the calendar year, based on Coinbase prices published on FRED[7].
- End of 2021
Upper limit of the target range: 0.25%.
- Mar–Jul 2022
Four increases take the upper limit to 2.50%.
- Sep–Dec 2022
Three more increases take it to 4.50% by December 15.
- Full year 2022
Bitcoin's price ends the year about 64% lower.
It is tempting to read that as cause and effect. But 2022 was also the year the 12-month CPI inflation rate peaked, at 9.1% in June[8], so rising rates were not the only thing going on. Our note is bitcoin an inflation hedge? looks at the inflation side of that year.
Do higher rates always mean a lower bitcoin price?#
No. The years after 2022 show how loose the link is. The table pairs the change in the top of the Fed's target range in each calendar year[6] with bitcoin's price change over the same year[7].
Worked example
Worked example: Fed target vs. bitcoin, calendar years 2022–2025
Upper limit of the federal funds target range at the end of the previous year and of the year itself, and bitcoin's price change between the last daily values of those years (Coinbase, 5 PM PST). Past figures, not a forecast.
| Year | Fed target (upper limit) | Change | Bitcoin price change |
|---|---|---|---|
| 2022 | 0.25% → 4.50% | +4.25 pp | −64.3% |
| 2023 | 4.50% → 5.50% | +1.00 pp | +155.9% |
| 2024 | 5.50% → 4.50% | −1.00 pp | +123.1% |
| 2025 | 4.50% → 3.75% | −0.75 pp | −7.1% |
Figures computed in code from the stated inputs; rounded to the nearest cent or tenth.
In two of the four years, bitcoin moved the way the simple story predicts. In the other two it did not: it rose strongly while rates went up in 2023, and it fell in 2025 while rates were cut. Four years is far too short a record to estimate a reliable relationship, and prices can also move on what investors expect the Fed to do before any decision is announced.
| Channel | Direction when rates rise | Why it may not show up |
|---|---|---|
| Cost of holding a non-yielding asset | Holding bitcoin costs more in forgone interest | Small next to bitcoin's yearly price swings |
| Appetite for riskier assets | Riskier assets look less attractive | Other news can dominate; correlation with stocks is partial |
| Real rates | Higher real rates raise the bar for any asset | Depends on inflation as well as the policy rate |
| Expectations | Moves may be priced in before a decision | The surprise matters more than the decision itself |
Fed on stocks and financial conditions[1]; IMF on bitcoin–stock correlation[4].
How can you use rate news without trying to predict prices?#
Rate decisions are scheduled, public and explained in writing, which makes them easy to follow. Use them to understand the backdrop, not as a trading signal. A sensible routine is to read the FOMC statement itself rather than a summary, note whether the move was expected, and check what it means for the yield you can earn on cash and bonds — see why bond prices fall when rates rise.
If you hold bitcoin, rate changes are one reason among many that its price can move sharply. The CFTC advises only speculating with money you can afford to lose[3]. For the full list of risks, read the risks of crypto investing, and for how bitcoin works, bitcoin basics.
What mistakes do beginners make?#
Treating one year as a rule
2022 fits the story that rate hikes hurt bitcoin; 2023 does not. Check several years before believing a simple relationship.
Watching the decision, not the surprise
If a rate change was widely expected, much of its effect may have happened before the announcement.
Forgetting inflation
A 4% rate with 3.7% inflation is a very different signal from 4% with 1% inflation. Look at the real rate.
Reading Fed statements about stocks as statements about crypto
The Fed describes how rates affect stock prices. Any link to bitcoin is an inference from how the two have moved together, not an official finding.
What else do beginners ask?#
Do rate cuts make bitcoin go up?
What was the Fed's latest rate decision when this note was written?
On September 16, 2026 it raised the target range by 1/4 percentage point to 3-3/4 to 4 percent, saying inflation remains elevated[2].
Why does bitcoin react to the Fed if it is decentralized?
The network runs without a central bank, but its price is set by people choosing between bitcoin and other assets. The CFTC notes its value comes entirely from supply and demand[3], and interest rates change what those other assets pay.
Where can I see the Fed's rate decisions?
Each decision is announced in an FOMC statement on the Federal Reserve's website, such as the September 16, 2026 statement[2]. Our note on how the Fed sets rates explains how to read one.
What is the bottom line?#
Interest rates can matter for bitcoin because bitcoin pays nothing while safe assets pay more when rates rise, and because rate moves can shift appetite for riskier assets. The 2022 hiking cycle fits that story; 2023 and 2025 show how easily other forces overwhelm it. Follow rate decisions to understand the backdrop, measure returns after inflation, and do not treat any rate move as a forecast for bitcoin's price.
Sources
Numbers in brackets in the text point here. Grade A = primary source (regulator, statistics agency, law or official document).
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