Fed Debate Puts Bitcoin and Gold in the Spotlight
Investors are mainly watching the Fed’s tone on a possible December rate hike. Higher rates and a strong dollar usually weigh on Bitcoin and gold.
Key Takeaways
- Futures traders are pricing in a 90% chance that the Federal Reserve will leave rates unchanged.
- The market is mainly focused on the odds of a rate hike in December, which CME FedWatch puts at 75%.
- Bitcoin and gold react to Fed communication, dollar strength, and rate expectations, which also matters for European investors.
Futures traders are pricing in a 90% chance that the Federal Reserve will leave rates unchanged on Wednesday. That shifts attention to two debates inside the central bank that matter most for Bitcoin and gold: where rates go next and how much the Fed is signaling about that now.
Rates and Communication
The Fed raised rates in September to a range of 3.75% to 4.0%, the first hike since July 2023. Since then, the market has mainly been focused on whether the next move comes in December. According to CME FedWatch, the odds of a rate hike on December 8 and 9 are now at 75%.
That expectation matters not just for bonds and stocks. Bitcoin and gold do not pay interest, which often makes them less attractive when the market expects higher borrowing costs and a stronger dollar. The dollar was still near a one-week high on Monday, while the 10-year yield stood at 4.9%.
What Warsh Does and Doesn’t Say
The tone from Fed Chair Kevin Warsh carries extra weight this time. He does not want to give a preview of the next steps and said: “We’re committed to a discipline, not to a decision.” Still, investors are reading his comments alongside the economic data as signs of another hike.
That is why the communication around the meeting is almost as important as the rate decision itself. In September, expectations for a rate hike rose quickly, before comments from other Fed officials pushed the odds back down again. Bitcoin then climbed from nearly $76,000 (€68,200) on the day of the hike to above $85,000 (€76,200) on September 30, after softer inflation data was released. Gold moved in the opposite direction.
Why This Matters for Europe
For European crypto investors, this matters because the Fed still has a big influence on the dollar, rates, and therefore sentiment around Bitcoin. Gold often reacts to the same macro factors too, although the relationship is not always straightforward. Historically, other factors such as inflation expectations and reserve management by central banks can also strengthen or slow gold’s moves.
Later this week, the U.S. inflation data for September and third-quarter growth figures will also be released. Those numbers could sharpen the debate over a December hike even more, but the outcome for now remains uncertain.
