Interpretation of the Federal Reserve Meeting Minutes: How Will Bitcoin Respond When Rate Cut Expectations Hit Zero?

April 9, 2026, the Federal Reserve announced the March FOMC meeting minutes, maintaining the federal funds rate within the 3.50% to 3.75% range with an 11:1 vote. This is the second time the Fed has chosen to hold steady after three consecutive rate cuts in 2025. Unlike the mild rate cut expectations still present in the market during the January meeting, the minutes sent a more complex signal: the rate cut window is being pushed significantly further out, and discussions of rate hikes have been reintroduced.

Data from CME FedWatch confirms this shift. As of April 9, the probability of the Fed cutting rates by a total of 25 basis points by December has fallen to 22.3%, nearly halved from 40.8% the day before; the probability of holding rates steady has jumped from 42.4% to 74%. Market expectations for rate cuts this year have shifted from “highly probable” to “low probability.” Under this macro environment, the pricing logic of crypto assets is undergoing a systematic reassessment.

Why the Fed Has Shifted from “Rate Cut Expectations” to “Rate Hike Discussions”

The March FOMC minutes show that there are clear dual risk assessments within the Fed regarding the next policy move. The minutes explicitly state that an increasing number of officials suggest including language in post-meeting statements that mention the possibility of rate hikes under certain conditions. The minutes note: “Some participants believe there is sufficient reason to include a two-sided description of future rate decisions in the post-meeting statement, reflecting that, in the case of persistent inflation above target levels, raising the interest rate target range may be appropriate.”

This wording change reflects the current policy dilemma faced by the Fed. On one hand, soaring oil prices driven by Middle East conflicts are exerting significant pressure on the global energy supply chain, increasing inflation uncertainty; on the other hand, employment growth is barely keeping the unemployment rate stable, with nearly all new jobs coming from healthcare-related sectors, raising concerns about employment stability and growth potential. The minutes plainly state: “The vast majority of participants see inflation upside risks and employment downside risks as elevated, with many noting these risks have increased with developments in the Middle East.”

Nick Timiraos, a journalist known as the “New Fed Communications Agency,” summarized: the Iran conflict has not made the Fed unwilling to cut rates, but has made its already cautious stance more complex — rate cut paths had already narrowed before the conflict erupted.

How High-Interest-Rate Environment Affects the Fundamental Valuation Models of Crypto Assets

The most direct impact of high interest rates on crypto assets lies in the asset pricing discounting logic. Institutions like HSBC expect the Fed to keep rates between 3.50% and 3.75% through 2026-2027, which essentially means a new “normal” for funding costs has been established, and the probability of quickly returning to a loose monetary environment has significantly decreased.

For crypto assets, this environment constitutes systemic valuation suppression. In traditional finance, rising discount rates lower the present value of future cash flows. Although Bitcoin does not generate traditional cash flows, its “long-term value” is still priced based on investors’ opportunity costs. When risk-free yields rise, the threshold for holding high-volatility, no-fixed-yield assets like Bitcoin is systematically raised. High interest rates thus become a uniform yardstick, compressing the valuation space and imagination for different risk assets.

Meanwhile, the market’s categorization of risk factors for crypto assets is also changing. After Trump nominated hawkish Kevin Waugh as the next Fed Chair in February 2026, Bitcoin dropped about 7% in a single day, Ethereum plummeted over 10%, and the entire market lost more than $800 billion in market cap. This “Waugh effect” essentially reflects a shift in the market’s anchor for monetary policy logic — from the old narrative of “inflation-driven fiat devaluation benefiting crypto as a store of value,” to a new paradigm of “rate discipline strengthening dollar credibility and liquidity tightening punishing risk assets.”

The Real Situation of Bitcoin’s “Digital Gold” Narrative Under High Rates

Between March and April 2026, a notable phenomenon emerged: despite the S&P 500 and gold both declining, Bitcoin unexpectedly rose about 7%. This movement was once interpreted by the market as the “digital gold” narrative being realized.

However, this appearance needs to be viewed within a broader macro framework. On-chain data shows that Bitcoin’s current recovery still lacks strong confidence support. As of April 9, Bitcoin’s price fluctuates around $70,000, but weak spot demand and slowing futures activity indicate that this rebound lacks robust organic demand. US spot ETFs, after long net outflows, have recently shifted to slight net inflows, suggesting initial signs of institutional demand returning, but scale remains limited.

Valuation metrics show Bitcoin’s true market mean at $78,000, with an realized price of $54,000, while the spot price remains below the short-term holder cost baseline of $81,600. This means any rebound entering this zone could face significant selling pressure from recent buyers. The Fear & Greed Index is at 14 — in the “extreme fear” zone, indicating market sentiment is far from healthy.

More critically, there are structural issues. When global large funds face geopolitical conflicts combined with high interest rates, their preferred safe havens remain the dollar and US Treasuries, rather than more volatile crypto assets. The narrative of Bitcoin as a safe haven is more often seen as a supplementary option and long-term structural allocation rather than a crisis-time primary tool.

Internal Pricing Divergence in the Crypto Market: Different Paths for BTC and Non-BTC Assets

In an environment of high interest rates and liquidity tension, the internal pricing logic of the crypto market is showing systemic divergence. 2026 is seen as a watershed year: Bitcoin, as a “digital commodity,” will serve as a hedge, while tokenized equity-like assets need to offer higher risk premiums to attract capital under clearer regulation and high risk-free rates.

This divergence is rooted in the different asset attributes. Bitcoin’s scarcity, decentralized network, and long-validated store of value make it still somewhat attractive for allocation during macro uncertainties. In contrast, many altcoins are essentially akin to high-growth tech stocks — their value heavily depends on future applications, ecosystem expansion, and user growth expectations. In a rising discount rate environment, these long-term assumptions are more easily discounted or even completely overturned.

Data shows that during the current correction cycle, the median altcoin has fallen about 79%, and meme coins have been nearly wiped out. This distribution clearly reflects the market’s risk pricing differences for various crypto assets. The market is empirically providing a “Bitcoin vs. non-Bitcoin” valuation stratification through actual price actions.

Has Liquidity Tightening Changed the Dominance of Crypto Asset Pricing?

In 2025, the Fed implemented three “defensive rate cuts,” but these did not trigger the anticipated flood of liquidity. Instead, large-scale margin lending and repo market financing continued to drain cash and reserves from the banking system, while the US Treasury issued large amounts of short-term T-bills, making liquidity more reliant on short-duration, rolling financing structures, leading to ongoing deterioration in dollar liquidity quality.

More tellingly, in just one year of 2025, the size of the repo market surged from about $6 trillion to over $12.6 trillion — more than three times the level during the 2021 bull market. This indicates that valuation support increasingly depends on high leverage short-term financing, with systemic fragility building up.

This change in liquidity structure profoundly impacts crypto asset pricing logic. Previously, crypto bull markets were mainly driven by “cheap money” spillover effects, with institutions allocating a small portion of liquidity to seek excess returns. But as overall financial system liquidity quality deteriorates and funding costs stay high, this spillover effect weakens. The pricing dominance of crypto assets is shifting from narrative and liquidity spillover to direct macro data pricing — meaning Bitcoin’s price correlation with the dollar index, US Treasury yields, and risk appetite indicators will continue to rise.

Some analysts point out that the key market focus is no longer internal crypto news, but oil prices, inflation expectations, and Fed policy paths. If oil stays above $95–105 per barrel, rate cuts will be further delayed; if oil drops below $85–90, markets will reprice expectations of monetary easing, and crypto assets will show significant resilience in this environment.

Core Dispute: Is High Interest Rate a Short-term Disruption or a Structural Reconfiguration?

Regarding the persistence of the current high interest rate environment, two main interpretative frameworks exist.

The first views high rates as a short-term disturbance. Supporters argue that the oil price surge caused by Middle East conflicts is essentially a supply shock; once geopolitical tensions ease, oil prices will fall, inflation pressures will subside, and the Fed will resume rate cuts. The March FOMC minutes also show that most members believe the effects of tariffs and oil prices will diminish later this year, with inflation returning to a slowdown trend and approaching the 2% target by year-end. Under this framework, the current crypto market adjustment is tactical rather than structural.

The second sees high rates as the beginning of a structural reconfiguration. The basis for this view is that even if geopolitical tensions ease, vulnerabilities in the global energy supply chain have been fully exposed — increased insurance costs for the Strait of Hormuz, rising shipping premiums, and higher global trade costs. More importantly, the Fed’s internal alertness to inflation is markedly higher than before. Minutes show most members warn that the pace of inflation returning to target will be slower than previously expected, and the risks of sustained above-target inflation have increased.

The divergence between these two frameworks essentially hinges on differing judgments about the “duration of the high interest rate environment.” This judgment will directly influence the medium- to long-term valuation center of crypto assets.

Summary

The March 2026 FOMC minutes define the Fed’s current stance with “dual risks” and “high uncertainty.” The rate cut expectation has shrunk from “multiple cuts within the year” to “possibly one cut,” and as of April 9, market pricing indicates only a 22.3% chance of a rate cut this year. Over the past quarters, the crypto market has undergone multiple rounds of macro reassessment.

Under this “higher for longer” interest rate framework, the valuation logic of crypto assets faces three major reforms: first, the systemic suppression caused by rising discount rates; second, internal market segmentation — with Bitcoin as a “digital commodity” on a different valuation path from high-beta altcoins; third, changes in global liquidity structures are weakening the “cheap money spillover effect,” accelerating the shift of pricing dominance toward macro data.

Whether Bitcoin’s “digital gold” narrative can hedge macro headwinds depends on a core variable: how the market ultimately defines Bitcoin’s position in the asset spectrum — as a risk asset or as a non-sovereign digital collateral. The answer will be ultimately tested by the duration and depth of the high interest rate environment.

Frequently Asked Questions (FAQ)

Q: Is there still a possibility of rate cuts in 2026?

Based on CME FedWatch data as of April 9, the market prices only a 22.3% chance of a 25 basis point rate cut in 2026, with a 74% chance of rates remaining unchanged. This indicates the mainstream expectation is no rate cut this year, but a small probability still exists for one cut.

Q: How does high interest rates affect Bitcoin’s long-term price?

High rates increase the opportunity cost of holding non-yielding assets, putting downward pressure on Bitcoin’s valuation. When risk-free yields (like US Treasury yields) are high, investors prefer interest-bearing assets over Bitcoin. However, in the long run, Bitcoin’s scarcity, decentralization, and network effects remain core factors influencing its value.

Q: What is Bitcoin’s current price level?

As of April 9, 2026, Bitcoin’s trading price on the Gate platform is around $70,000 to $72,000. Recent prices rebounded from $65,000–$68,000, but market sentiment remains in extreme fear, and the recovery foundation is still fragile.

Q: Which crypto assets might perform better in a high interest rate environment?

In macro high-rate conditions, the valuation logic of different crypto assets is diverging. Bitcoin, with its “digital commodity” attributes and established market consensus, can still attract some allocation demand amid macro uncertainty. In contrast, many altcoins resemble high-growth tech stocks — their valuations are more vulnerable to high discount rates, with greater compression risks. Investors should differentiate based on asset attributes.

Q: What does a strengthening dollar mean for the crypto market?

A strong dollar generally exerts pressure on crypto markets. It makes dollar-denominated risk-free yields more attractive, drawing capital into US Treasuries and safe assets; it also correlates with risk-off sentiment globally, which can weigh on crypto assets like Bitcoin. Conversely, a weakening dollar tends to boost crypto attractiveness.

Q: How does geopolitical risk influence the crypto market?

Geopolitical risks have a dual transmission mechanism. Conflicts pushing oil prices higher increase inflation expectations, making it harder for the Fed to cut rates, thus suppressing risk assets. Meanwhile, some investors see Bitcoin as a non-sovereign safe haven amid geopolitical uncertainty. The dominant effect varies over different stages and contexts.

Q: What indicators should investors monitor in the current macro environment?

Key indicators include CME FedWatch rate expectations, US Treasury yield curves, dollar index trends, oil price movements, spot ETF fund flows, and on-chain accumulation/distribution metrics. A comprehensive analysis of these macro and on-chain data helps better understand crypto market pricing.

Risk warning: Virtual asset investments are high-risk activities with volatile prices and potential total loss of principal. The content herein is for informational purposes only and does not constitute investment advice. Please make decisions cautiously based on your financial situation and risk tolerance.