Biggest Macro Risk for Bitcoin Presents for the First Time Since 2006

Three central banks are about to tighten at once for the first time since 2006. The last time that happened, the assets bought with borrowed money broke first.

The European Central Bank has already raised. The Federal Reserve decides Wednesday. The Bank of Japan decides Friday. The macro risk for Bitcoin (BTC) is what that combination did to risk assets last time.

The 2006 Template for Risk Assets

The ECB moved on September 10, taking its deposit rate to 2.50%. Futures now put the Fed near 90% odds of a hike.

"The conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period," ECB Governing Council said.

In 2006 the squeeze landed on May 10. Over the next month, losses stacked in a very tight order.

That order was not luck. Cheap money had been borrowed and pushed into whatever paid most. When borrowing got expensive, the furthest-flung bets were sold first.

Then markets recovered, and the S&P 500 still finished 2006 up 15.79%. The real crash came two years later, out of mortgage debt.

Where Bitcoin's Macro Risk Actually Sits

Bitcoin did not exist in 2006, but it has since faced an almost similar test.

In August 2024 the Bank of Japan raised rates and the yen jumped. Japan's TOPIX index shed 12% in a single day. Bitcoin fell as much as 20%.