Analysts warn Bitcoin may encounter additional resistance following Fed's aggressive stance on rates
Market participants are anticipating a 78% probability of rate increase in December, as experts suggest that Treasury yields, dollar strength, and forthcoming inflation figures may shape Bitcoin's trajectory.
Market analysts suggest that Bitcoin may encounter additional challenges following the US Federal Reserve's decision to keep interest rates unchanged while maintaining a hawkish stance on inflation concerns.
In a 10-2 vote on Wednesday, the Fed decided to keep its benchmark interest rate within the range of 3.75% to 4%, with Governor Lisa Cook and Cleveland Fed President Beth Hammack dissenting in favor of a quarter-point rate increase.
Fed Chair Kevin Warsh recognized that inflation continues to exceed 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.
According to Iggy Ioppe, chief investment officer at tokenization platform Theo, while the rate hold decision was largely anticipated by the market, the hawkish tone of the Fed's messaging caught investors somewhat off guard.
Markets had the hold priced, but not the hawkish tone.
Iggy Ioppe, Theo CIO
Market participants are anticipating that the Fed will implement a rate increase during its Dec. 8-9 meeting, with additional hikes expected in the following year.
According to CME FedWatch data as of Wednesday, traders were assigning a 78.4% probability to a quarter-point rate increase by December and a 67.3% probability of at least a quarter-point increase by March.
When asked about potential rate increases at the end of the year, Warsh refrained from making any commitments.
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.
Ioppe noted that in an environment of elevated interest rates, Bitcoin must "compete with" a risk-free rate approaching 4%.
Meanwhile, Bitget analyst Lewis Huang suggested that Bitcoin's future direction might be influenced less by the Fed's rate decision and more by factors such as Treasury yields, the strength of the US dollar, and overall 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.
Lewis Huang, Bitget analyst
Market analysts, including Huang, are now turning their attention to Thursday's personal consumption expenditures inflation report and earnings releases from major technology companies to gain insights into the trajectory of risk assets.
Fabian Dori, chief investment officer at Sygnum Bank, echoed this sentiment, noting 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.
Fabian Dori, Sygnum Bank CIO