Fed meeting is shaping up to be a nightmare for Warsh. Bitcoin might still shine
An aggressive market expectations trap and a strict aversion to forward guidance have backed the Fed chair into a corner, where failing to deliver a hawkish message risks destroying the central bank’s inflation-fighting credibility.
The Senate defeat of the Clarity Act has left bitcoin bulls at the mercy of Wednesday’s Federal Reserve meeting, an event that some observers warn could prove highly challenging for the central bank’s chair, Kevin Warsh.
The Federal Reserve is scheduled to announce its interest rate decision at 2:00 PM ET, with Warsh set to hold a press conference 30 minutes later. Ahead of the announcement, bitcoin, the largest cryptocurrency by market value, was trading at $75,800, down nearly 3% over the past 24 hours. The broader digital asset market also faced downward pressure, with tokens including JUP, XLM, and ICP each declining by about 10%.
Financial markets have almost fully priced in a 25-basis-point rate hike, which would lift the federal funds target range to 3.75%-4%, according to the CME’s FedWatch tool. Nearly every major investment bank also expects at least one more rate hike before the end of the year, according to data shared by Wall Street Journal reporter Nick Timiraos.
While rising yields are traditionally a bearish signal for non-yielding assets like bitcoin and gold, some observers note that the underlying driver matters. In this instance, yields are expected to climb due to an inflation signal from the Federal Reserve rather than an optimistic economic growth outlook, a crucial distinction that alters the typical market playbook.