Fed’s hawkish rate hold keeps pressure on Bitcoin: Analysts

Bitcoin is anticipated to remain under pressure after the US Federal Reserve maintained interest rates, signaling persistent inflation concerns. The Fed’s hawkish rate hold keeps the benchmark interest rate steady at 3.75% to 4%. This decision, reached by a 10-2 vote, saw Governors Lisa Cook and Cleveland Fed President Beth Hammack advocating for a quarter-point increase.

Fed Chair Kevin Warsh acknowledged that inflation persists above the central bank’s 2% target, noting that Americans have faced inflation exceeding the Committee’s objective for nearly six years. He emphasized the central bank's responsibility to reduce inflation. Iggy Ioppe, chief investment officer at Theo, stated that while the rate hold was largely expected, the Fed's hawkish communication was not fully priced in by investors.

Market expectations suggest potential rate increases at the Fed’s December 8-9 meeting and into the next year. CME FedWatch data indicated a 78.4% probability of a quarter-point increase by December and a 67.3% probability of at least a quarter-point increase by March. Warsh refrained from commenting on future rate decisions, citing the dynamic nature of economic conditions.

Ioppe also highlighted that Bitcoin must compete with a nearly 4% risk-free rate under elevated interest rate conditions. This adds another layer of complexity for the cryptocurrency's performance in the current economic climate.

Conversely, Bitget analyst Lewis Huang suggested that Bitcoin’s immediate trajectory might be more influenced by Treasury yields, the US dollar’s performance, and overall investor sentiment rather than solely the Fed’s decision. Huang indicated that with limited new direction from the Fed, these factors would likely play a more significant role in Bitcoin’s near-term performance.

Analysts, including Huang, are now focusing on upcoming economic indicators. These include Thursday’s personal consumption expenditures inflation report and earnings releases from major technology companies, for insights into the direction of risk assets. Fabian Dori, chief investment officer at Sygnum Bank, concurred, noting that the release of PCE inflation data and earnings reports from several “Mag 7” companies would provide clarity on whether AI capital expenditures are translating into revenue.

He added that broader liquidity and financial conditions would likely shape the market's path toward the December Fed decision, following these short-term catalysts.