Fed’s hawkish rate hold keeps pressure on Bitcoin

Traders are pricing in a 78% chance of a December rate hike, while analysts say Treasury yields, the US dollar and upcoming inflation data could determine Bitcoin’s next move.

Bitcoin could face further headwinds after the US Federal Reserve held interest rates steady while signaling continued concern about inflation, according to market analysts. 

The Fed voted 10-2 Wednesday to maintain its benchmark interest rate at 3.75% to 4%, with Governor Lisa Cook and Cleveland Fed President Beth Hammack favoring a quarter-point increase. 

Fed Chair Kevin Warsh acknowledged that inflation remained above the central bank’s 2% target. 

“Americans… are still dealing with inflation that has been running above the Committee’s objective for close to 6 years. It’s our responsibility to get inflation down,” he said.

Iggy Ioppe, chief investment officer at tokenization platform Theo, said the decision itself was widely expected, but investors had not fully anticipated the Fed’s hawkish messaging. 

“Markets had the hold priced, but not the hawkish tone,” he said in comments sent to Cointelegraph.

There are expectations that the Fed will raise rates in its Dec. 8-9 meeting, and again next year.

CME FedWatch data showed traders assigning a 78.4% probability to a quarter-point increase by December and a 67.3% probability of at least a quarter-point increase by March, as of Wednesday. 

Warsh declined to say whether the Fed would raise rates at the end of the year. 

“A lot of things can happen, so I’m not going to be able to share with you my musings about what happens when this group gets together six weeks from now,” he said during a press conference.

At elevated interest rates, Bitcoin has to “compete with” a risk-free rate near 4%, said Ioppe.

However, Bitget analyst Lewis Huang said Bitcoin’s next move could depend less on the Fed’s decision itself than on Treasury yields, the US dollar and broader investor sentiment. 

“With limited new direction from the Fed, Bitcoin’s near-term performance may depend more heavily on Treasury yields, dollar movements and broader risk sentiment,” he said. 

Analysts, including Huang, are now looking to Thursday’s personal consumption expenditures inflation report and earnings from major technology companies for clues about the direction of risk assets. 

Sygnum Bank chief investment officer Fabian Dori agreed, adding that “the next couple of days promise more excitement” with Thursday’s release of PCE inflation data.

“Various Mag 7 companies reporting earnings this week will help clarify whether AI capex is turning into revenues. Following these short-term catalysts, broader liquidity and financial conditions are likely to shape the path towards the December decision,” he added.