Changes in the Federal Reserve's interest rates, which manage the cost of borrowing money in the United States, can significantly impact the correlation between cryptocurrencies and traditional financial markets.

This relationship influences the risk-return profile of cryptocurrency investments.

Interest rate adjustments affect cryptocurrency values by altering investor behavior and overall market dynamics.

Lower interest rates make borrowing less expensive, enhance economic liquidity, boost consumer spending, and encourage investment.

On the other hand, higher interest rates make borrowing more costly, decrease the money flow in the economy, and slow down economic activities, targeting inflation control.