Rise in Rates Reduces Liquidity in Risk Markets
The Federal Reserve's commitment to keep interest rates high has redefined the macroeconomic landscape for digital assets. Historically, higher US rates act as a drag on the crypto sector, restricting liquidity, strengthening the dollar and limiting speculative risk appetite.
Each rate hike increases the cost of money for institutions and retail investors. This higher cost naturally discourages leveraged positions on volatile assets such as Bitcoin or Ethereum.
A stronger dollar amplifies the pressure: because cryptocurrencies are denominated in USD, international investors face higher relative prices when the greenback strengthens.
Monetary tightening also means less liquidity in circulation; and in a market like crypto, where liquidity and sentiment feed off each other, this can quickly dampen bullish momentum. At the same time, the more attractive yields offered by Treasuries and savings instruments have attracted some of the capital away from digital assets.
Since 2022, Bitcoin's correlation with US equities and technology stocks has intensified, meaning that any movement in Treasury yields or rate expectations now directly reflects on crypto markets as well.
Update on Bitcoin Market: Institutional Demand Compensates Macro Pressures
At 27 October 2025, the price of Bitcoin (BTC) hovers around $115,000, rebounding from the lows at the beginning of the month. Despite the macroeconomic difficulties, the market is showing signs of resilience. Institutional inflows into Bitcoin and Ethereum funds and ETFs remain robust, indicating long-term conviction on the part of managers, even in a high interest rate environment.
According to CoinShares and SoSoValue data, cryptocurrency investment products have recorded about $930 million in net inflows over the past week, with Bitcoin funds taking the lion's share. The overall capitalisation of the crypto market exceeds $3.8 trillion, the highest level since early October.
Analysts note that Bitcoin's structure appears "cleaner" after recent liquidations, with reduced leverage in the derivatives markets. This healthier setup allows the price to better absorb volatility from macro events.
What to watch This Week: Fed Signals and Key Levels of BTC
Traders are bracing for a potentially volatile week ahead of the Federal Reserve's upcoming announcement, which could alter expectations of rate cuts for 2026. A more accommodative tone, or an acknowledgement of cooling inflation, could support risky assets; conversely, a more aggressive message would strengthen the dollar and could trigger profit-taking on cryptocurrencies.
Technically, Bitcoin's short-term support lies around $110,000, while resistance lies between $118,000 and $120,000. Holding above 110,000 keeps the underlying bullish trend intact. A decisive break to the upside, accompanied by further inflows into ETFs, could reopen the way towards $125,000.
Ethereum also followed a similar trend, regaining $4,000 and stabilising after two weeks of high volatility. Major altcoins such as Solana (SOL), XRP and BNB also posted slight weekly gains.
A Resilient But Rate Sensitive Market
The current setup highlights a paradox: monetary tightening and institutional optimism coexist. Bitcoin's ability to stay above $110,000 despite high rates demonstrates the maturation of its market structure and the expansion of its institutional investor base.
However, macro risk remains. Should Treasury yields rise further or the dollar index (DXY) continue to strengthen, Bitcoin's bullish potential could be reduced. Conversely, any sign that the Fed is nearing the end of its tightening cycle could reignite risk appetite ahead of November.
For now, Bitcoin remains suspended between political pressures and capital inflows: resilient, but rate-sensitive. The message from the Federal Reserve this week will determine whether the crypto market's recovery will continue or enter a consolidation phase.
