According to market analysts, Bitcoin could face further headwinds after the US Federal Reserve kept interest rates steady while signaling ongoing concerns about inflation.
The Fed voted 10-2 on Wednesday to keep its key interest rate at 3.75% to 4%, with Gov. Lisa Cook and Cleveland Fed President Beth Hammack supporting a quarter-point increase.
Fed Chairman Kevin Warsh recognized that inflation remained above the central bank’s 2 percent target.
“Americans … are still struggling with inflation that has been above the committee’s target for nearly six years. It is our responsibility to bring inflation down,” he said.
Iggy Ioppe, chief investment officer at tokenization platform Theo, said the decision itself was widely expected, but that investors did not fully anticipate the Fed’s hawkish message.
“Markets held the price but not the hawkish tone,” he said in comments sent to Cointelegraph.
There are expectations that the Fed will raise interest rates at its meeting on December 8th and 9th and again next year.
CME FedWatch data showed Traders expect a 78.4% chance of a quarter-point rise by December and a 67.3% chance of at least a quarter-point rise by March, as of Wednesday.
Warsh declined to say whether the Fed would raise interest rates at year’s end.
“A lot of things can happen, so I can’t give you my thoughts on what happens when this group comes together in six weeks,” he said during a news conference.
With increased interest rates, Bitcoin would have to “compete” with a risk-free rate close to 4%, Ioppe said.
Related: The rise in Bitcoin price was rejected at the 50-day trendline ahead of the FOMC results
However, Bitget analyst Lewis Huang said that Bitcoin’s next move could depend less on the Fed’s decision itself and more on Treasury yields, the US dollar and general investor sentiment.
“With the Fed’s new direction limited, Bitcoin’s near-term performance could be more dependent on Treasury yields, dollar movements and overall risk sentiment,” he said.
Analysts, including Huang, are now looking to Thursday’s consumer spending inflation report and earnings from big technology companies for clues on the direction of risk assets.
Sygnum Bank Chief Investment Officer Fabian Dori agreed, adding that “the next few days promise even more excitement with the release of PCE inflation data on Thursday.”
“Various Mag 7 companies reporting earnings this week will help clarify whether AI investments are converting into revenue. Following these near-term catalysts, broader liquidity and financial conditions are likely to shape the path to the December decision,” he added.
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