Cryptocurrency analysis company Alphractal shared its Bitcoin predictions for traditional markets, the FED’s interest rate policy, and possible crises.
Cryptocurrency analytics firm Alphractal has published an in-depth assessment of Bitcoin (BTC) and broader market trends, shedding light on the relationship between interest rates, the S&P 500, and digital assets.
The latest report, titled “Interest Rates, the S&P 500, and Bitcoin: Lessons from the Past and Expectations in 2025,” examines historical market reactions to the Fed’s policy changes and offers important insights for investors navigating the current economic environment.
COVID-19 Crash and Recovery (2020): The Fed’s emergency rate cuts and liquidity injections initially led to a sharp 35% decline in the S&P 500, followed by a rapid recovery. Bitcoin has been volatile, but has ultimately benefited from the low-interest environment, strengthening its appeal as an alternative asset.
Since 2022, the Fed has aggressively raised interest rates from near-zero to 5.5% to counter post-pandemic inflation. Unlike previous crises, the S&P 500 has remained resilient, reaching new highs in 2024-2025. Alphractal attributes this to the following reasons:
However, the divergence between interest rates and stock market performance is a major concern, according to the analyst firm. Historically, such a breakout has been preceded by high volatility.
Bitcoin’s historical performance reveals a strong correlation with liquidity conditions:
According to Alphractal, the impact of future rate cuts will depend on their nature:
Alphractal outlines three possible scenarios for 2025:
