Interest Rates, Central Banks and Bitcoin: What the Policy Rate Does to the Price

Short answer: Interest rates and bitcoin are connected, but more loosely than headlines claim. Low rates make money cheap and push it into risky assets; high rates make safe saving more attractive. In 2020/21 bitcoin rose by over 600% at zero rates, in 2022 it fell by 62% as rates rose. In 2023/24 it doubled despite a 5.5% policy rate.

Every time the US Federal Reserve decides on the policy rate, you read the same headlines: "Rate cut, here comes the bitcoin rally" or "Rates stay high, bitcoin under pressure". This article shows with real data since 2020 how interest rates and bitcoin are really connected, why the market usually runs ahead of the central banks, and what the interest rate means for you as a long-term holder in euros or francs.

What central banks steer with the interest rate

A central bank issues central bank money and sets the rate at which banks can borrow from it or park money with it. This policy rate affects all other rates: mortgages, consumer loans, instant-access savings and government bonds.

The goal is stable purchasing power. The ECB and the Fed aim for 2% inflation, the SNB for inflation below 2%. If prices rise too fast, they raise the rate: loans get more expensive, less is borrowed and spent. If the economy is doing badly, they cut it. How new money is created in the first place is explained in the article The fiat money system, explained simply.

Sources: Fed (FRED DFEDTARU/DFEDTARL, CPIAUCSL), ECB (key interest rates), SNB data portal, Destatis, FSO.

Besides the interest rate, central banks have had a second tool since 2008: they buy government bonds on a large scale. This is how the Fed's balance sheet grew from $4.31 trillion in March 2020 to $8.97 trillion in April 2022. It has been shrinking since; in November 2026 it stood at $6.76 trillion. How this flood of money affects the money supply is shown in the article M2 money supply and the bitcoin price.

Why interest rates affect bitcoin

Bitcoin pays no interest. How much that matters depends on what you get elsewhere. Three channels are important:

1. The comparison with the savings account. If a fixed-term deposit pays 0%, holding bitcoin costs you nothing. If it pays 5%, you give that up. The higher the rate, the more risky assets have to offer for investors to hold them.

2. Cheap money and leverage. When rates are low, funds, traders and companies borrow money cheaply and use it to buy shares and bitcoin. When rates rise, this credit becomes expensive and is repaid. What fluctuates most is sold first.

3. The dollar. Higher US rates make the dollar more attractive. A strong dollar pushes down the bitcoin price in dollars; conversely, a weak dollar helps. For you in euros or francs, the effect can therefore partly disappear again.

Interest rates and bitcoin since 2020: phase by phase

The US central bank is the most important one for bitcoin, because bitcoin is traded worldwide in dollars. The table shows the bitcoin price between its turning points, each on the day of the decision.

Sources: FRED (DFEDTARU), bitcoin closing prices from bitcoin-powerlaw.com's daily data. Upper bound of the Fed's target range.

Three things stand out:

1. The big turns came before the central bank. Bitcoin reached its high on November 8, 2021 at $67’525. By the first rate hike in March 2022 it had already lost 39%. The low came on November 21, 2022 at $15’784, eight months before the last hike. The market trades what it expects from the central bank, not what it does.
2. High rates did not prevent the 2023/24 rise. At a 5.5% policy rate, bitcoin doubled. The approval of US spot ETFs in January 2024 and the halving in April 2024 had a stronger effect. How much money came in through the ETFs is shown in the article Bitcoin ETF flows.
3. Rate cuts are no buy signal. In the cutting phase, bitcoin rose to its record high by October 2025 and then fell, even before the Fed decided its last cut.

The real rate shows more than the policy rate

More telling than the policy rate is the real yield on 10-year inflation-protected US Treasury bonds. It shows what an investor safely gets after inflation.

Source: FRED DFII10 (real rates as of Nov 10, 2026 for the last row).

The jump from −1.1% to +1.5% in 2022 coincided exactly with the crash. After that the fit is weaker: by October 2025, bitcoin rose to a new high even though the real rate was higher than at the 2022 low. In October 2026, the real rate reached 2.95%, its highest level since 2008. That is a headwind, but no formula for the price.

And the ECB and SNB?

The ECB followed the Fed in 2022 with a lag of around four months: first hike in July 2022, peak of 4.0% in September 2023, cuts from June 2024 to June 2025 down to 2.0%. The SNB raised its rate from −0.75% in June 2022 to 1.75% in June 2023 and cut it to 0% by June 2025.

For the bitcoin price, both matter less than the Fed, because bitcoin trading runs mostly in dollars. They still count for you: they determine what your savings in euros or francs earn, and thus what holding bitcoin costs you.

Why central banks can't steer bitcoin

Bitcoin was created as an answer to monetary policy. In the first block, on January 3, 2009, Satoshi Nakamoto wrote the headline of the London Times: "Chancellor on brink of second bailout for banks". A few weeks earlier, the Fed had cut its policy rate to zero.

With the euro, franc and dollar, a committee decides on the price of money and on how much new money is created. With bitcoin there is neither an interest rate nor a committee. When and how many new bitcoin are created is in the code, and the supply ends at 21 million. It currently grows by around 0.8% a year, after the 2028 halving by around 0.4%.

So central banks can influence the price of bitcoin by making money cheaper or more expensive. They can't change the supply. Why this very scarcity makes good money is explained in the comparison What is good money? Why, according to Ludwig von Mises, artificially low interest rates trigger crises later is explained in The Austrian School and bitcoin.

What the interest rate means for your savings

For you as a saver, the interest rate is not a stock market topic but a simple question: do you get more in your account than inflation takes away? Right now, no. Instant-access savings in Germany pay 0.52% on average, fixed-term deposits up to one year 2.39%, and prices are rising by 2.8%. In Switzerland, a 2-year Kassenobligation (medium-term bank note) pays 0.49%, and inflation is 1.0%. The background is in the pillar article Inflation and loss of purchasing power.

For long-term buyers, expensive money has a second side: relative to the Power Law trend, bitcoin has so far been at its lowest in phases of rising rates, and at the end of 2022 even briefly below the floor.

Where bitcoin stands on Nov 12, 2026

Bitcoin is trading at 0.66 times the trend and thus in the accumulation zone (0.62–0.79×), around 7% above the floor. Since its record high of October 6, 2025, it has lost 43% while the Fed and ECB raised rates again. How the model is calculated is in the methodology and in the article The bitcoin Power Law explained.

What you can make of rate decisions

1. Read rate decisions as a weather report, not a timetable. Rising rates are a headwind, falling rates a tailwind. They don't predict when the price will turn.
2. Don't trade on the decision. By the time the central bank decides, the market has usually priced it in. Anyone who waited for the first rate cut in 2023 would have missed much of the rise.
3. Buy regularly. A savings plan takes the question of the right moment off your hands and automatically buys cheaper in phases of high rates.
4. Factor in interest if you borrow against bitcoin. Rates on bitcoin-backed loans follow the policy rate. When it pays off is shown in Borrow instead of sell, and you can work it through in the calculator Borrow instead of sell.
5. Compare yields with the interest rate. Bitcoin preferred stocks currently pay dividends of 10% and more, because fixed-term deposits and bonds pay so much less. What that means in terms of risk is shown in Digital credit compared.

Work out your savings plan in euros or francs, across phases of high and low interest rates:

How money, central banks and bitcoin fit together in principle is explained in the Academy under Understand & secure.