Rising oil and gas prices have pushed up inflation expectations, prompting markets to rethink Federal Reserve rate cuts. Traders now see nearly a 40% chance that rates won’t be cut this year, up sharply from under 3% earlier.
Bitcoin BTC $67,482.86 may have already priced in tighter monetary policy, leaving equities more exposed to macro shocks, according to asset manager Bitwise. The cryptocurrency has fallen below $70,000, down more than 23.7% year-to-date.
Geopolitical tensions and energy disruptions, particularly from the U.S.-Iran conflict near the Strait of Hormuz, have fueled higher oil and gas prices, which in turn have pressured inflation expectations. On prediction markets such as Polymarket and Kalshi, odds of Fed rate cuts this year have plummeted.
“Energy prices remain closely linked to inflation expectations,” said Luke Deans, senior research associate at Bitwise. “The recent surge has reversed expectations for previously anticipated Fed rate cuts toward renewed tightening.”
While equities have begun to react—S&P 500 down nearly 8% over the past month—Bitwise argues that bitcoin adjusted earlier. “Bitcoin, a highly reflexive and liquidity-sensitive asset, responds quickly to shifts in risk appetite,” Deans said. Indicators like the Mayer Multiple, which compares BTC’s price to its 200-day average, have remained in the lower historical percentiles since January, suggesting the cryptocurrency has already reset expectations.
By contrast, equities began the year at elevated valuations and are only now repricing as macro conditions worsen. “Assets that have already experienced valuation compression tend to show lower downside risk,” Deans said, “while markets near cyclical highs remain more vulnerable to negative shocks.”
Within crypto, bitcoin’s dominance has strengthened, creating a market largely driven by BTC’s price, with correlations across altcoins rising sharply.
