The Federal Reserve's interest rate hikes or cuts significantly impact the cryptocurrency market. When rates rise, borrowing costs increase, reducing liquidity and pressuring investors to shift from risky assets like crypto to safer options like bonds. This often leads to price drops in Bitcoin and altcoins, as seen during tightening cycles. Conversely, rate cuts lower borrowing costs, boosting liquidity and encouraging investment in high-risk, high-reward assets like cryptocurrencies. This can trigger bullish market sentiment, driving prices up. However, crypto’s response isn’t always linear—market speculation, global events, and adoption trends also play roles. For instance, a rate cut amid economic uncertainty might not lift crypto if confidence remains low. Traders closely watch Fed announcements, as even hints of policy shifts can spark volatility in this sensitive, speculative market.