Fed Hike Nearly Certain as Bitcoin Stays Firm Above $78,000
The market is already pricing in 25 basis points, which could limit the reaction to the Fed. Bitcoin benefited after the hot CPI data and stayed above $78,000.
Key Takeaways
- The Federal Reserve looks almost certain to raise rates next week after a higher core CPI reading in the United States.
- Bitcoin rose after the inflation data to around $78,600, about 1.5% higher over 24 hours.
- Traders had already priced in a rate hike, which could limit the market’s reaction if the Fed does what is expected.
The Federal Reserve looks almost certain to raise rates next week after a hot core CPI reading in the United States. What matters most for the crypto market is that many traders had already priced in that move, which could keep the reaction limited if the Fed does what is now expected. Bitcoin rose after the data and was trading around $78,600 (€67,800), about 1.5% higher over 24 hours.
Inflation Puts Pressure on the Fed
Core inflation rose 0.3% in August, while economists had expected 0.2%. Overall inflation came in at 0.4% month over month and 3.4% year over year, exactly in line with expectations. The data followed higher producer prices earlier in the week and came a day after the European Central Bank had already raised rates.
Bank of America expects the Fed to deliver a 25 basis point hike next week, followed by another 50 basis points of tightening by the end of the year. Fitch Ratings said the latest inflation data makes it increasingly hard to justify a pause.
The Market Is Already Looking Ahead
According to Joel Kruger of LMAX Group, traders were already leaning toward a rate hike before the CPI numbers were released. He said a big part of the restrictive policy is already priced into markets. That means the market could react relatively calmly if the Fed does exactly what everyone expects.
The bigger move could actually come if the central bank unexpectedly does not raise rates. Kruger called that scenario the most likely setup for a bigger move higher in risk assets.
Matt Mena of 21Shares also does not see a rate hike as automatically bad news for Bitcoin. He pointed out that Bitcoin has risen an average of 2.13% in the 30 days after hotter-than-expected core CPI readings. Mena also pointed to the gains in Ether and Solana as a sign that traders are not rushing out of crypto risk en masse.
Why This Matters for Crypto
For European crypto investors, this mainly shows how strongly Bitcoin and other tokens still move with interest rate policy in the United States. Higher rates make returns on other investments more attractive, but if the market sees inflation and policy pressure as the bigger problem, Bitcoin can sometimes behave differently from a classic risk asset. That makes next week’s Fed decision relevant for the crypto market outside the U.S. too.
Earlier, the market already showed how quickly Bitcoin can move once the odds of a Fed hike rise.
