S&P 500, Interest Rates and Bitcoin: Analysis Company shared three scenarios for the BTC price in 2025!

The crypto analysis firm Alphractal published an in-depth assessment of Bitcoin (BTC) and broader market trends by shedding light on the relationship between interest rates, the S&P 500, and digital assets.

The recent report titled "Interest Rates, S&P 500 and Bitcoin: Lessons from the Past and Expectations for 2025" examines historical market reactions to the FED's policy changes and provides important insights for investors navigating the current economic environment.

• Dot-Com Bubble (2000-2002): The FED's interest rate hikes contributed to the burst of the technology bubble and caused the S&P 500 to drop by approximately 50% due to the collapse of overvalued companies.
• Subprime Crisis (2007-2009): The FED triggered a global financial crisis by raising interest rates to combat inflation and excessive credit, causing the S&P 500 to drop by approximately 57%.

COVID-19 Collapse and Recovery (2020): The FED's emergency interest rate cuts and liquidity injections initially led to a sharp 35% drop in the S&P 500, followed by a rapid recovery. Although Bitcoin experienced volatility, it ultimately strengthened its appeal as an alternative asset by benefiting from the low interest rate environment.

Current Cycle (2022-2025): Differentiation in Market Behavior

Since 2022, the FED has aggressively raised interest rates from near-zero levels to 5.5% in order to combat post-pandemic inflation. Unlike previous crises, the S&P 500 has remained resilient, reaching new peaks in 2024-2025. Alphractal attributes this to the following reasons:

• Lower institutional leverage compared to 2008.
• Strong performance from artificial intelligence and technology giants like NVIDIA and Microsoft.
• Gradual interest rate cut expectations are fueling investor optimism.

However, according to the analysis company, the divergence between interest rates and stock market performance is a significant source of concern. Historically, such a break has occurred before high volatility.

Bitcoin's historical performance shows a strong correlation with liquidity conditions:

• 2010-2021 (Low Interest Period): Bitcoin rose from just cents to 69,000 dollars in 2021.
• 2022 Interest Rate Increases: BTC experienced a sharp correction and dropped to around $16,000.
• 2024-2025 Stabilization: With interest rates slightly decreasing, Bitcoin regained strength and reinforced its role as a protection against expansionary monetary policy and inflation.

What Happens to Bitcoin If the FED Lowers Interest Rates?

According to Alphractal, the impact of future interest rate cuts will depend on their nature:

• Emergency Discounts (Crisis Indicator): If the FED is forced to lower interest rates due to a major economic shock similar to ( 2008 or 2020, initial market reactions may be downward, and both the S&P 500 and Bitcoin could experience sharp declines.
• Preventive Discounts )Soft Landing(: As seen in 1995-1996 and 2019, gradual interest rate cuts can support market growth by benefiting both stocks and digital assets.

2025 Market Scenarios: Alphractal's Predictions

Alphractal summarizes three possible scenarios for 2025:

• Gradual Interest Rate Cuts: If the FED lowers interest rates in a controlled manner without triggering a recession, the S&P 500 may maintain its upward momentum and Bitcoin can benefit from increased liquidity.
• External Shock: Geopolitical instability, banking failures, or another pandemic could lead to a sharp decline in the market despite interest rate cuts.
• Persistently High Interest Rates: If inflation continues to be stubborn and the FED maintains or raises interest rates, a serious market correction similar to 2000 or 2008 may occur.