Scenario × Asset Analysis

What Happens to Bitcoin When the Fed Cuts Rates?

What happens to stocks, bonds, gold, and Bitcoin when the Federal Reserve cuts interest rates? Historical patterns and market playbooks for Fed easing cycles.

Bitcoin

$76,932.4

as of May 18, 2026

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Trigger: Federal Funds Rate

3.64%

Condition: decreases (Fed begins easing)

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By Convex Research Desk · Edited by Ben Bleierⓘ

Data as of May 18, 2026

Bitcoin's response to the fed cuts rates is the historical and current pattern of bitcoin performance during this scenario, driven by the macro mechanism described in the sections below and verified against primary-source data through the date shown.

Also known as: BTCUSD, XBT.

Where Do Things Stand in April 2026?BTC ~$77,000 After the October 2025 Peak

Bitcoin trades at approximately $77,160 on the morning of April 29, 2026. This is well below the all-time high of $126,198 reached on October 6, 2025. The Fed has cut 175 basis points from the 5.25% to 5.50% peak to the current 3.50% to 3.75% target range, with the first 50 basis point cut on September 18, 2024 and additional cuts continuing through 2024 and 2025. Total US spot bitcoin ETF AUM exceeds $102 billion as of April 23, 2026, with BlackRock's IBIT at approximately $63 billion. ETF flows have been net-positive for four consecutive weeks through April 24, 2026 with $824 million in inflows during that window. Bitcoin's relationship with Fed cuts is short by macro-asset standards. BTC has experienced one full Fed cut cycle (2019 to 2020 plus the 2020 to 2022 zero-rate period), one full Fed hiking cycle (2022 to 2023), and the 2024 to 2026 cut cycle. The 2024 to 2026 cycle is the first one in which BTC reached a new all-time high during the cuts and then sold off back toward the start-of-cycle levels even as the Fed continued to ease. That divergence between Fed policy direction (cutting) and BTC price (declining) is the central puzzle of this cycle.

Why Cuts Drive Bitcoin: Liquidity and Dollar Channels

Bitcoin's correlation with Fed cuts runs through the global liquidity channel and the dollar channel rather than the discount-rate channel that drives equities. BTC has no cash flows to discount, so changes in the policy rate do not directly affect any theoretical valuation. What matters is whether the macro environment is producing more or less risk-asset capital and whether the dollar is appreciating or depreciating against BTC. The transmission: Fed cuts typically weaken the dollar via rate-differential compression, which lifts dollar-denominated asset prices including BTC. Fed cuts also typically expand global liquidity (M2 money supply, bank reserves, ETF flows) which historically has been the largest macro driver of BTC. The 2019 to 2021 Fed cut cycle plus QE drove the largest sustained BTC rally on record. The 2024 to 2026 cycle has tested whether cuts alone (without QE) can sustain that pattern. The early answer (October 2024 to October 2025 rally to $126,198) was yes; the more recent answer (the 14-month bear vs gold from December 2024) is more ambiguous.

Setup 1: 2008 Cuts → Bitcoin Did Not Yet Exist

The 2007 to 2009 Fed cut cycle predates Bitcoin. The Bitcoin whitepaper was published October 31, 2008, and the genesis block was mined January 3, 2009, both after the Fed had begun cutting and during the early phase of QE1. There is no BTC price data for comparison to that cycle. The 2007 to 2009 episode is relevant only as macro context: the combination of front-end cuts plus large-scale balance-sheet expansion that defined that cycle is the same combination that subsequently drove the 2020 to 2021 BTC rally.

Setup 2: 2019 to 2021 Cuts Plus QE → BTC Rallied 17x

The Fed cut three times in 2019 for a total of 75 basis points, then cut from a 1.50% to 1.75% target range to 0% to 0.25% in two emergency meetings in March 2020 and launched unlimited quantitative easing. BTC fell to $3,949 on March 13, 2020 during the COVID liquidation event, then rallied to $68,789 by November 10, 2021, a roughly 17x move from the March 2020 low. The 2019 to 2021 cycle is the high-water mark for the "Fed cuts equal BTC up" thesis. The combination of zero rates, unlimited QE, and unprecedented fiscal stimulus drove a 22-month BTC rally that included no major drawdowns until the 2022 hiking cycle began. Investors who panicked at the March 2020 liquidation missed the subsequent rally to $68,789. The cycle established the modern BTC playbook: emergency policy response is the largest macro tailwind BTC has historically received.

Setup 3: 2024 to 2026 Cuts → Initial Rally, Then Bear vs Gold

The September 18, 2024 Fed cut produced a clean BTC reaction: BTC traded near $61,000 on the day of the cut, gained approximately 6.6% within the week to roughly $64,300, and gained roughly 11% within the month. The rally extended through 2024 and 2025, with BTC crossing $100,000 on December 4, 2024 and reaching its all-time high of $126,198 on October 6, 2025. The disappointment came after the October 2025 peak. BTC has fallen back toward $77,000 by April 2026 even as the Fed has continued to cut. The bitcoin-to-gold ratio peaked near 40 ounces per BTC in December 2024 and stood at approximately 16.3 ounces per BTC in April 2026, a roughly 60% move against bitcoin in gold terms over approximately 16 months. This is the largest sustained move against BTC in gold terms since the 2018 crypto winter. The 2024 to 2026 cycle is the first one in which Fed cuts coincided with BTC giving back most of its rally during the cut cycle itself, which complicates the cuts-equals-BTC-up thesis. ETF flows turning net-positive again in April 2026 suggests the institutional bid is still active, but the cycle has clearly differed from 2019 to 2021.

What Should Investors Watch in April 2026?

Three signals separate the cycle-complete case from the cycle-extension case: First, ETF net flows. The week of April 20 to 24, 2026 saw $824 million in net inflows across all spot bitcoin ETFs, the fourth consecutive positive week. Sustained $1 billion-plus monthly inflows are the institutional-bid base case. A rotation back to multi-month net outflows (as happened during stretches of 2025) would be the highest-confidence signal that the cycle peak has printed. Second, the bitcoin-to-gold ratio. Currently at approximately 16.3 ounces per BTC, near the lower edge of the 12-year trading range. Historical mean reversion has occurred from ratios below 15 and above 35. A drop below 15 would historically suggest extreme bitcoin underperformance has bottomed. Continued grind below current levels would suggest the regime has structurally shifted toward gold dominance. Third, the Fed's direction from here. The April 2026 FOMC was 8-4 split with the statement noting elevated inflation. Markets are pricing the next move as a cut, but a hawkish pivot would remove one of the two structural BTC tailwinds (rate-cut liquidity). A move toward QE in response to recession would re-engage the 2019 to 2021 playbook. The 2019 to 2021 cycle delivered BTC roughly 17x returns from the March 2020 low. The 2024 to 2026 cycle has delivered approximately 8x from the November 2022 low to the October 2025 peak, then given back about 40% of the rally. Whether the 2026 to 2027 path mirrors the post-2018 accumulation phase or extends the bear-versus-gold of 2025 depends on whether the institutional ETF bid can sustain inflows when the underlying rally has paused.

Scenario Background

When the Federal Reserve cuts the federal funds rate, it reduces the cost of overnight borrowing between banks, which cascades through the entire financial system. Lower rates reduce mortgage payments, corporate borrowing costs, and the discount rate applied to future earnings. In theory, this stimulates economic activity by making it cheaper to borrow and invest, while reducing the opportunity cost of holding risk assets over cash.

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Historical Context

The Fed has conducted major easing cycles in 1989-1992, 1995-1996, 1998, 2001-2003, 2007-2008, 2019-2020, and 2024-2025. The 1995 and 2019 cycles were "soft landing" insurance cuts where the S&P 500 continued to rally. The 2001 and 2007 cycles were reactive, stocks fell despite aggressive cutting because the economic damage was already done. In 2007-2008, the Fed cut from 5.25% to near zero, yet the S&P 500 fell 57% from peak to trough. In 2019, three insurance cuts of 25 bps each fueled a 10%+ equity rally. The key lesson: the first cut's context matters more than the cut itself.