Bitcoin’s current decline bears similarities to the market conditions that preceded the Federal Reserve’s first rate hike in March 2022, leaving open the possibility of a short-term recovery followed by further losses.

The Federal Reserve raised its benchmark interest rate by 25 basis points on Wednesday, setting the target range at 3.75%-4.00%. It was the Fed’s first rate increase in more than three years. Financial markets are pricing in an additional 75 basis points of tightening over the next six months.

Historical data suggests the latest increase is unlikely to be a standalone move. Since 1994, the Fed has implemented only one tightening cycle that ended after a single rate increase. One-hike cycles have also been rare among the 12 tightening campaigns conducted since 1955.

There are relatively few historical Bitcoin cycles available for comparison. BTC was active during the tightening cycle that began in 2015, but its market was considerably smaller and less developed, making that period a weaker reference point. The 2022 tightening cycle provides a closer comparison because Bitcoin had a more mature market structure.

Several similarities with 2022 have already emerged. Bitcoin peaked near $69,000 in November 2021 and had lost about 40% of its value when the Fed delivered its initial rate increase in March 2022. Bitcoin is now trading roughly 40% below its October peak of $126,000.

The response following the March 2022 hike was initially positive. Bitcoin advanced about 18% during the next 12 days, but the recovery was later followed by a decline of approximately 50%. That sequence highlights the possibility of a relief rally occurring before a longer period of weakness. At the same time, the comparison remains limited because it relies on a single mature-market example. Bitcoin’s 2022 losses also came amid declines in equities, bonds and metals and widespread disruption across the crypto industry.

Inflation was a key factor behind Wednesday’s rate increase. Annual headline inflation has remained above 2% for more than five years, while core inflation, excluding food and energy, has eased to 2.4%, its lowest reading in five years. The decline suggests that underlying price pressures have moderated to some extent.

Energy prices, however, are creating another challenge. Middle East geopolitical tensions have driven both WTI and Brent crude above $100 per barrel, raising the risk that inflation could accelerate again while economic growth comes under pressure. Bond markets are also tightening, with the U.S. 10-year Treasury yield reaching 5%, increasing pressure on financial conditions and risk assets.

With Bitcoin’s bear market nearing the one-year mark, the latest shift back toward higher interest rates could become another factor determining whether the downturn continues.