Many people think that a rate cut automatically means prices will rise, but the way the Fed's interest rate moves impact the crypto market is not that straightforward.

Let’s start with the US dollar. Rate cuts reduce the yield on dollar assets, so money naturally looks for new opportunities. When the dollar is weak, things priced in dollars—BTC being a prime example—usually perform well.

Next, liquidity. Lower interest rates mean cheaper borrowing, which pumps more money into the market. Some of that money will flow into high-risk areas in search of returns. Think back to the 2020-2021 bull run, which was largely a byproduct of the Fed’s easy money policies.

Finally, sentiment. When the Fed sends dovish signals, investors become bolder, moving funds from safe havens like bonds and money market funds into stocks and crypto; conversely, when the Fed turns hawkish, money retreats to safety.

These three clues connect to form a transmission route: “Fed policy adjustment → changes in dollar strength/market liquidity → shifts in risk appetite → crypto asset price fluctuations.”

Now, looking at BTC itself. The market currently labels it in two ways: either as “digital gold” or as a “risk asset.”

If it truly is digital gold, it should behave like physical gold—rising when markets crash and moving inversely to stocks. But if it’s a risk asset, it should rise and fall in step with the Nasdaq, benefiting from loose liquidity.

The facts lean toward the latter. CME data shows that since 2020, BTC’s correlation with the Nasdaq 100 has jumped from nearly zero to around 0.4, peaking above 0.7 at times. So, for now, it may be more realistic to think of BTC as a distant relative of tech stocks—at least in the short term.