The last time the Federal Reserve hiked rates, Bitcoin’s price remained steady – but that was over three years ago.
- CME FedWatch Data showed markets pricing in a 92.5% chance the Fed will raise rates by a quarter point on Wednesday, the Fed's first hike since July 2023.
- Twenty of 22 firms tracked by The Wall Street Journal expect a hike this month.
- Tom Lee called any potential hike a "policy error" as supply-shock inflation fades.
Bitcoin (BTC) slipped below the $77,000 mark on Tuesday ahead of the Federal Reserve’s rate decision on Wednesday, with markets pricing in a 92% chance of a quarter-point hike that would end more than a three-year pause in rate increases.
However, crypto analysts like Bitmine Immersion Technologies (BMNR) chairman Tom Lee and MNFund founder Michael van de Poppe believe that a rate hike is unlikely. If the Federal Reserve does hike rates, it would be the first time since July 2023 that the cryptocurrency market has faced an interest rate increase.
Bitcoin’s price fell over 3.3% in the last 24 hours to around $76,200. On Stocktwits, retail sentiment around the apex cryptocurrency remained in the ‘extremely bearish’ zone over the past day.
What Are Analysts Saying?
Van de Poppe said that he does not expect a rate hike and that, no matter what, markets will likely be on the rise. The next 48 hours will be volatile with the Clarity Act vote and the Federal Open Market Committee (FOMC) meeting overlapping, he said.
He also added that he would likely buy any further dip. At a technical level, Van de Poppe sees Bitcoin at range lows after a period of consolidation. He forecast that if Bitcoin reclaims $78,000, it could open a move between $90,000 and $92,000 over the coming weeks.
Meanwhile, Lee argued against the hike on Monday. Lee said he agreed with Moody's Analytics Chief Economist Mark Zandi, and quoted him saying that the Fed "can wait."
A hike would be a “policy error,” said Tom Lee. He agreed that the economy is already close to potential growth and full employment, while much of the remaining inflation comes from supply shocks that are fading.
He cited Goldman Sachs estimates, which said those shocks add about 1.75 percentage points to Core PCE right now and should fade by 100 bp into early 2027 even without tighter policy, he noted. “Why hike when Core PCE [is] set to decline 100 bp without a hike?” he asked, noting that markets often rally once they have braced for the news.
Will The Fed Hike Rates?
The comments came as the CME Group's FedWatch tool showed a 92% chance of a September rate hike, up from 59.4% a week ago and a 33.1% chance a month ago.
A quarter-point hike would raise the Fed's target range from 3.50% to 3.75%, to between 3.75% and 4%. The Fed is slated to announce its decision on Wednesday.
Wall Street Journal data cited by Wall Street chief economics correspondent Nick Timiraos showed 20 of the 22 firms tracked by the publication expect the Fed to raise rates this month. Nineteen of them expect rates to rise by at least half a point this year, which points to a second hike before December. Only Jefferies and Oxford Economics see the Fed's next move as a cut, and both of those calls date back to July.
Bitcoin Barely Moved After The Last Fed Hike
The Fed last raised rates in July 2023. The move was the Fed's 11th increase in about a year and raised rates to between 5.25% and 5.50%. Before that meeting, FedWatch had shown a 98.9% chance of a quarter-point hike.
Bitcoin was trading just below $30,000 before that decision. The apex cryptocurrency had closed at $29,228 on July 25, according to historical price data.
On decision day, it closed up just 0.4% at $29,352, and then it dropped to $29,201 the next day. By then, Bitcoin had traded between about $29,000 and $31,500 for over a month, according to CoinGecko.
The February 2023 hike followed a similar pattern. The quarter-point move was widely expected. Bitcoin held around $23,000 after the decision, according to data. It had rallied nearly 40% in January.
This time, Bitcoin is down 12% year-to-date and has fallen around 32% over the past month. It has been range-bound between around $60,000 and $80,000 since May.
Read also: Bitcoin Mining Faces A Shakeout As CORZ, KEEL, IREN, CIFR Get Ready To Exit, Says CoinShares
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