Investing

Let’s talk Bitcoin and the impact rising interest rates has on the speculative, high risk asset.

The chart above shows Bitcoin (blue) and SOFR (red). SOFR is the Secured Overnight Financing Rate which measures the cost of borrowing money overnight collateralized by Treasury Securities. For more information on SOFR Rates, reference this article: Secured Overnight Financing Rate Data.

As you can see, the Fed’s aggressive hiking campaign has been detrimental for Bitcoin. The cryptocurrency peaked in November 2021 trading above $68,000. The collapse in cryptocurrency prices has ravaged the industry leading to a swath of bankruptcies across the board with the most prominent bankruptcy being the crypto firm FTX.

Cryptocurrency as an asset class has exploded over the past two years. Many financial experts question its use and value while others claim its the future of finance. Crypto is a relatively new asset class so the arguments for and against it are normal. One thing we know for sure is that Bitcoin and cryptocurrencies do not perform well in a rising interest rate environment!