The Federal Reserve will announce its rate decision at 2 p.m. ET, followed by Chair Kevin Warsh's press conference at 2:30 p.m. ET. Although this meeting lacks updated economic projections and a "dot plot" of interest-rate forecasts, three factors make the outcome unusually important for bitcoin.
Three Reasons for Outsized Importance
- Unusual uncertainty: CME fed funds futures show markets assigning roughly a 35% probability of a rate increase, a level of indecision rare this close to a decision. Citadel, one of the largest hedge funds in the world, is predicting an increase, arguing the move would end forward guidance as a policy choice, an outcome Chair Warsh has long favored.
- Rising bond yields: Both the 10-year and two-year Treasury yields have broken above key trendlines that defined the shallow pullback in place since 2023, indicating the path of least resistance is now to the upside.
- Oil price resurgence: WTI crude oil prices have climbed nearly 20% this month while U.S.-Iran peace talks remain deadlocked, pointing to potential renewed inflation following the June relief tied to the earlier oil-price selloff. This leaves the Fed little room for dovish talk.
If the Fed raises rates or sounds hawkish, already buoyant bond yields could rise sharply, potentially creating a headwind for risk assets including cryptocurrencies. Conversely, a sharp rise in crypto prices could emerge if the Fed downplays inflation fears despite resurgent oil prices.
The 10-year and two-year Treasury yields have both topped trendlines representing a pullback trend that began nearly three years ago in October 2023. This breakout indicates the temporary breather may be over, with the broader upswing in interest rates that began in 2021 potentially picking up pace.
