A common mistake many beginners make is not understanding the true relationship between Federal Reserve rate hikes and the crypto market, resulting in a stumbling market reaction. Simply put, the two are like a subtle opposition—yet they also influence each other.

The fundamental reason is actually quite simple. Cryptocurrencies are all priced in USD. The liquidity of the US dollar directly determines the direction of coin prices. When the Fed raises interest rates, the dollar becomes "more valuable," prompting everyone's first reaction to deposit money in banks for interest or buy government bonds. Who would want to risk high-volatility assets like crypto at this point? Imagine you have 100,000 yuan, and bank interest rates rise from 1% to 5%. Would you still consider trading coins? Most likely not. Most people would obediently deposit their money, and funds in the crypto space are thus drained away, causing prices to naturally fall.

But there's a particularly critical point—"expectations" often have a greater impact than the actual implementation. Even before the Fed officially announces a rate hike, the market starts to decline because smart investors have already sniffed out the information and begin selling their coins. Conversely, when the rate hike actually happens, there can be a "sell the news" rebound, where prices not only stop falling but slightly rise. The previous rate hike was like this: the market collapsed a week in advance, but on the day of the official announcement, Bitcoin surprisingly rose by 5%.