From 2018 to 2026: Structural Comparison of Rate Hike Repricing Expectations and Bitcoin Cycle Patterns

On the early morning of June 18, 2026, the Federal Open Market Committee (FOMC) of the Federal Reserve unanimously voted 12-0 to keep the federal funds rate target range unchanged at 3.50% to 3.75%. This marks the fourth consecutive time the Fed has held rates steady. The rate decision itself was not surprising—CME FedWatch tools showed a 99.6% probability of holding rates unchanged before the meeting.

But the market’s re-pricing after the decision can be described as “violent.”

According to CME FedWatch data, after the FOMC decision, the probability of maintaining the rate unchanged in December (no hike) plummeted from 38.2% before the decision to 16.1%. Correspondingly, the cumulative probability of rate hikes increased across the board: a 36.4% chance of a 25 basis point hike, 33.8% for a 50 basis point hike, and 13.7% for a 75 basis point hike. Overall, the probability of at least one rate hike before the end of the year has risen to 83.9%.

Source: CME FedWatch

This figure has surged significantly from about 61% before the decision, nearly doubling from the mid-May level of around 40%.

The dot plot is the core trigger for all this. At the March meeting, none of the 18 officials believed that rate hikes would be necessary in 2026. But the latest June dot plot shows: among the 18 officials submitting rate forecasts, 9 expect at least one hike in 2026—3 forecast a 25 basis point increase, 5 forecast a 50 basis point increase, and 1 forecast a 75 basis point increase; the number of officials expecting to keep rates unchanged has fallen to 8, with only 1 still considering a possible rate cut within the year.

The communication paradigm shift by the new Fed Chair Kevin Warsh is equally critical. Warsh did not submit a rate forecast—becoming the only “dot” missing from the dot plot. The policy statement was sharply compressed from about 340 words in April to around 130 words, removing previous language hinting at possible rate cuts within the year. At the press conference, Warsh emphasized a commitment to price stability, mentioning “inflation” 12 times and “labor market” only 5 times.

Bitcoin dropped immediately after the FOMC announcement, falling to about $64,264 on June 18, with a 24-hour decline of approximately 1.78% to 1.95%. ETH fell about 3.6%, and SOL about 3%.

This is not the first time Bitcoin has faced the shock of Fed rate hike expectations. In 2018 and 2022, Bitcoin experienced two very different rate hike cycles. Looking back from June 2026, these two histories may help us understand the current market positioning.

2018 Rate Hike Cycle: Falling from a Historical High

In 2018, under Chair Powell, the Fed raised rates four times, each by 25 basis points, from 1.25%-1.50% to 2.25%-2.50%.

This was Bitcoin’s first full experience of a Fed rate hike cycle. In December 2017, Bitcoin had just hit a record high of about $19,345. At that time, market sentiment was extremely euphoric, and sensitivity to macro liquidity was far less than today.

But the cumulative effect of rate hikes eventually manifested. After four consecutive hikes, a strengthening dollar, and tightening global liquidity, Bitcoin began a sustained decline from early 2018. The full-year decline was about 74%. From peak to trough, the maximum drawdown reached approximately 80%-84%.

Market reactions immediately following individual FOMC rate hikes are also noteworthy. After the March 2018 hike, Bitcoin experienced a decline of over 10% in the following days. After the June hike, Bitcoin plunged about 20% over four days. Following the last hike in December 2018, Bitcoin’s price further bottomed out around $3,500.

A key feature of the 2018 rate hike cycle was that the “expectation gap” effect had not yet become the dominant factor. At that time, crypto market pricing logic focused more on trend continuation—hikes meant liquidity tightening, which pressured risk assets, and Bitcoin followed this macro narrative downward. The market’s “surprise” reaction to the rate decision itself was not intense; the real pressure came from the cumulative effects of the rate hike cycle.

After the Fed completed its last hike in December 2018, Bitcoin rose from about $3,500 to around $12,000 before the first cut in July 2019, a gain of approximately 161.7%. This data was widely cited later, serving as empirical evidence for the trading logic that “the best window for Bitcoin is between the last hike and the first cut.”

2022 Rate Hike Cycle: Expectation Gap-Driven Volatility

If 2018 was Bitcoin’s first encounter with a rate hike cycle, 2022 was its first in an environment where “expectation gap” dominated after a significant institutionalization of the market.

In 2022, the Fed raised rates seven times. The pace started with a 25 basis point hike in March, followed by a 50 basis point increase in May, then four consecutive 75 basis point hikes in June, July, September, and November, and a 50 basis point hike in December. This was the most aggressive rate hike cycle since the 1980s.

Bitcoin declined about 65 throughout 2022. From a high of around $69,000 in November 2021 to a low of about $15,500 in November 2022, the maximum drawdown was nearly 78%.

Unlike 2018, Bitcoin’s reaction to individual FOMC meetings in 2022 showed a more complex pattern. Despite several large 75 basis point hikes mid-year, Bitcoin’s decline slowed over time. After a 75 basis point hike, short-term rebounds often occurred, suggesting “bad news is already priced in.”

Specifically: after the Fed announced a 50 basis point hike on May 5, 2022, Bitcoin fell from about $34,000 to below $30,000 within days, a decline of over 15%. After the 75 basis point hike in June, Bitcoin dropped about 18% in a week. After the December 15, 2022, 50 basis point hike, Bitcoin fell about 2.5% within an hour of the announcement, to $17,740.

This “rise first, then fall” or “jump and then retreat” pattern reflects a core shift in market pricing logic—from “rate hikes = bad news” to “expectation gap = volatility.” When hikes meet or fall below expectations, markets briefly rebound; but as cumulative tightening effects ferment, the trend remains downward.

In December 2022, the Fed completed its last hike. Before the final hike in July 2023, Bitcoin gradually rebounded from around $16,000 to over $30,000.

Quantitative Comparison of the Two Hike Cycles

Placing the 2018 and 2022 cycles side by side reveals several key differences:

Number and pace of hikes: 2018 saw four evenly spaced hikes of 25 basis points each; 2022 had seven hikes, including four consecutive 75 basis point hikes, with a very aggressive pace.

Annual Bitcoin decline: about 74% in 2018, about 65% in 2022. The absolute decline was larger in 2018, but considering the starting points (around $20,000 in 2018 vs. around $47,000 in 2022), the scale of market value evaporation in 2022 was much greater.

Pattern of FOMC reactions: 2018 was mainly trend-driven decline, with less “expectation gap” trading after individual decisions; 2022 saw frequent “bad news priced in” rebounds, followed by resumption of downtrend.

Market structure differences: 2018’s crypto market was still retail-dominated with limited institutional participation; 2022 had a substantial institutional infrastructure (futures, options, ETF expectations), making the market more sensitive and efficient in macro data pricing.

Rebound strength after the bottom: from the last hike to the first cut, Bitcoin rose about 161.7% in 2018-2019; in 2022-2023, it rose about 94% from around $16,000 to over $31,000. Both periods saw significant positive returns, but the rebound in 2018-2019 was larger, likely due to a lower base effect.

June 2026: The Maximal Expectation Gap Pattern

As of June 18, 2026, Bitcoin was trading around $64,264, down about 33.74% from the same period in 2025, and down about 22.4% from the recent 90-day high of $82,828.

The current environment shares similarities with both 2018 and 2022, but also has fundamental differences.

Similarities include: the Fed again signals hawkishness, with the dot plot shifting from rate cut expectations to rate hike expectations, prompting re-pricing of the rate path. In March, no officials supported rate hikes, 7 supported cuts; by June, 9 officials supported hikes, only 1 supported cuts—this 180-degree expectation reversal is similar to the 2022 scenario when market pricing shifted sharply from 50 to 75 basis points.

Differences are also clear. The 2018 and 2022 hikes occurred at the “start” or “early” phase of the shift from easing to tightening—markets were digesting the “first hike” and “acceleration of hikes.” In contrast, June 2026’s situation is that rates are already in the “restrictive zone” of 3.50%-3.75%, and the market had widely expected rate cuts in 2026, but now the dot plot indicates “possible hikes.” This is not a zero-to-one shock but a shift from “loose policy expectations” to “tightening expectations.”

The most critical difference is the degree of expectation gap. After the FOMC in June 2026, the market’s pricing of a no-hike scenario in December dropped from 38.2% to 16.1%, with an 83.9% chance of at least one hike before year-end. This means the market has re-priced “hike” as the baseline scenario within hours. Such speed and magnitude of expectation adjustment are unprecedented in Bitcoin’s history.

Looking back at 2022, during the most aggressive rate hike cycle, expectations for the next meeting’s hike size adjusted gradually—rising from 50 to 75 basis points over weeks, validated by data. The June 2026 adjustment, however, is essentially a one-time redefinition of the entire rate path triggered by the dot plot’s “institutional signal.”

Another difference is Warsh’s communication style. Warsh has long questioned the effectiveness of the dot plot as a communication tool. In his first press conference, he mentioned “inflation” 12 times but only “labor market” 5 times. The policy statement was cut from 340 words to 130, with forward guidance removed entirely. This means the market’s previous reliance on the Fed’s future rate path “anchor” was actively removed. When the anchor is gone and the dot plot signals hawkishness strongly, market reactions tend to amplify rather than converge.

What does this mean for Bitcoin?

In the 24 FOMC meetings from 2022 to 2024, a consistent pattern emerged: the meetings triggered portfolio rebalancing rather than fundamental trend changes. The dot plot shifts and Fed Chair’s press conferences influence market moves more than the rate decision itself.

The June 2026 meeting again confirms this pattern—the hawkish dot plot’s impact far exceeds the “status quo” of rate hold. Bitcoin fell to about $64,264 after the decision, with declines of about 1.78%-1.95%, and ETH and SOL declined even more.

Historically, Bitcoin’s performance during rate hike cycles depends on three core variables: whether hikes are fully priced in, the extent of cumulative tightening, and market expectations of future policy paths.

Currently, rate hikes (with unchanged rates as a baseline) are fully priced in, but the sharp correction of the “83.9% chance of a hike before year-end” may not be fully digested by Bitcoin prices yet. An 83.9% probability of hikes implies the market considers hikes almost certain—this is approaching “locked-in” in futures market language.

Some analysts believe that the current US economic expansion is driven more by temporary factors like World Cup-related employment, inflation pulses, and fiscal shocks, which are expected to fade after August-September, possibly leading to further revision of hike expectations. In other words, the actual probability of hikes in 2026 might be lower than the futures market’s 83.9%.

But the key point is: the market trades on expectations, not facts. As long as the 83.9% figure remains on FedWatch, the pricing logic for risk assets must incorporate “hike almost certain.”

Conclusion

In 2018, Bitcoin fell 74% during the rate hike cycle; in 2022, it fell 65%. Both cycles were accompanied by significant bear markets, but the pattern of Bitcoin’s immediate FOMC reaction was entirely different—shifting from trend decline to expectation-gap-driven volatility, reflecting improved market pricing efficiency and increased institutionalization.

In June 2026, under Kevin Warsh’s first chairmanship, the Fed issued a statement of about 130 words and a dot plot supporting rate hikes by 9 officials, signaling a hawkish stance. CME FedWatch shows the probability of rate hold in December dropping from 38.2% to 16.1%, with an 83.9% chance of at least one hike before year-end. Bitcoin promptly dropped below $65,000.

This is the first time Bitcoin has faced such an extreme expectation reversal—“from rate cut expectations directly to nearly certain hikes.” Past experiences in 2018 and 2022 show that the impact of a rate hike cycle is cumulative, and immediate reactions to single FOMC decisions are often smaller than the overall cycle effects; after the “last hike,” Bitcoin has historically rebounded significantly.

But what makes 2026 unique is that the market has already priced in an 83.9% chance of hikes before the first rate increase even occurs. Will the hikes materialize as expected, or will the market’s “almost certain” expectation be disappointed? If hikes do not happen (e.g., inflation data cools after August-September), how will Bitcoin digest the “expectation gap” of 83.9%?

The answers depend on upcoming inflation data, oil prices, and how the Fed under Warsh communicates in this “no forward guidance” paradigm. For Bitcoin, whether the $64,000 support holds may be a short-term issue; the real focus is how the market prices a path from “rate cut expectations” to “83.9% hike probability”—and how this extreme pricing might replay the scripts of 2018 or 2022.