Why Bitcoin Is Down 30%, And Why It May Reverse by Year-End

The real story isn’t last Friday’s jobs report. It started in May, and it’s all about interest rates.

Forget the noise. One chart tells the whole story of Bitcoin’s 2026 so far.

At the start of the year, BTC was trading at $88,800 and the probability of a Fed rate hike by year-end was just ~5%. Today, BTC sits at $61,000 — and that rate hike probability has surged to 78.2%.

That’s not a coincidence. That’s the entire trade.

The inverse relationship

Bitcoin moves with liquidity. It always has.

When interest rates are low, money sloshes around the financial system looking for yield. Investors take risks — in equities, in crypto, in anything that offers a return above the near-zero rate on safe bonds. Bitcoin benefits.

When rate hike expectations rise, the calculus flips. Investors can earn a real yield sitting in treasury bonds without taking any risk at all. Capital flows out of risk assets. Bitcoin suffers.

This isn’t new. It’s the same dynamic that governs stocks, real estate, and virtually every other risk asset. Bitcoin is no different — despite what the “digital gold / inflation hedge” narrative would have you believe.

What triggered the shift in 2026

Three consecutive FOMC meetings where the Fed held rates gave markets hope early in the year. There were even expectations of two rate cuts by year-end.

Then came the Iran conflict.

Oil prices spiked. Inflation — already stubborn — began moving higher again. The PPI (what companies pay for inputs) started rising, and that fed through into core PCE and CPI. The Fed, facing a stronger-than-expected economy and rising prices, had no room to cut.

The data confirmed it on June 6th. The non-farm payroll report showed 172,000 jobs added in April — nearly double the 90,000 expected. A booming labor market means no recession risk, no justification for cuts, and increasing pressure to hike.

Rate hike probability went from 22.5% in April to 78.2% overnight. Bitcoin dropped from $80K to $61K.

The contrarian case for the second half of 2026

Here’s where I diverge from the market consensus.

I think a 78% probability of a rate hike is wrong — and when the market figures that out, Bitcoin will recover sharply.

Three reasons:

1. The new Fed chair. Jerome Powell’s successor, Chair Walsh, was appointed by President Trump precisely because Trump believes he will cut rates — not raise them. The idea that Walsh will greenlight a rate hike in his first year, against the wishes of the administration that appointed him, seems unlikely.

2. The inflation spike is transitory. The current inflation pressure is largely oil-driven, and oil prices have structural reasons to ease. OPEC is fracturing — multiple members are increasing production above quota. The US is ramping domestic output. Russia has regained the ability to sell oil freely. Even Venezuela is increasing production. As supply rises, energy prices come down, and the headline inflation driver fades.

3. AI is a long-term deflationary force. Productivity gains from AI are already beginning to show up in the data, and will likely accelerate. Technology has historically driven down the cost of producing goods and services — this cycle will be no different, and the Fed knows it.

Add to this the fragility of the housing market (already weakened by elevated rates), and the picture becomes clear: the Fed has every reason to pause, and very little justification to hike.

I explained more in my latest video

Historical context: oversold Bitcoin tends to recover

Looking at the last two years, every time Bitcoin’s RSI dropped below 30 — signaling extreme oversold conditions — it closed higher in the subsequent 7 days, 1 month, and (6 out of 7 times) 3 months.

We are in one of those moments now.

What to watch

The leading indicator for Bitcoin’s next move isn’t the BTC chart — it’s rate expectations on CME FedWatch. When the probability of a hike starts declining, and the probability of a hold or cut starts climbing, that’s your signal.

I believe we’re near the peak of rate hike expectations. If I’m right, the surprise from here to year-end will be a gradual repricing away from hikes — and that should be meaningfully positive for Bitcoin.

This article is for informational purposes only and does not constitute financial advice. Always do your own research.

Richard is CEO of altFINS, a crypto analytics platform.

Why Bitcoin Is Down 30%, And Why It May Reverse by Year-End was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.