3 reasons Wednesday’s Fed meeting is pivotal for BTC

The Federal Reserve (Fed) will announce its rate decision at 2 p.m. ET today, followed by Chair Kevin Warsh’s press conference at 2:30 p.m. ET.

Traders typically assign greater weight to FOMC meetings that come with updated economic projections and a “dot plot” of interest-rate forecasts. Today’s gathering lacks both. Yet the outcome still carries outsized importance for three reasons.

Unusual uncertainty over the outcome: Markets are still assigning roughly a 35% probability of a rate increase, CME fed funds futures show. That level of indecision is rare so close to a decision. By now, traders have usually converged on a clear expectation of a hold, hike or cut. Citadel, one of the largest hedge funds in the world, is predicting an increase. The firm argues a move would end forward guidance as a policy choice, an outcome Chair Warsh has long favored.

Bond yields are already rising: Both the 10-year and two-year Treasuryyields have broken above key trendlines that defined the shallow pullback in place since 2023 (check the Daily Signal). With the breakout complete, the path of least resistance is now clearly established to the upside.

Oil price resurgence: WTI crude oil prices have climbed nearly 20% this month, while peace talks between the U.S. and Iran remain deadlocked. The combination points to the potential for a renewed increase in inflation, following the June relief, which was largely tied to the earlier oil-price selloff. This leaves the Fed with little room for dovish talk.

If the Fed does raise rates or sound hawkish, the already buoyant bond yields could rise sharply, potentially creating a headwind for risk assets, including cryptocurrencies. In contrast, a sharp rise in crypto prices may emerge if the Fed downplays inflation fears despite resurgent oil prices. Stay alert!

Read more: For analysis of today’s activity in altcoins and derivatives, see Crypto Markets Today . For a comprehensive list of events this week, see CoinDesk’s “Crypto Week Ahead.”

• Oil rises as US-Iran tension escalates after Iraq strikes, missile attack (Reuters): Oil prices jumped more than 4% on Wednesday as tensions in the Middle East escalated ‌following U.S. and Saudi strikes in Iraq and an intercepted Iranian missile attack on U.S. forces, while U.S. crude inventories fell.
• Company behind AI trade that caused $60 million crypto liquidations to cover all losses (CoinDesk): Trade.xyz said it will reimburse traders liquidated when its SK Hynix perpetual futures contract crashed 19% late on Monday, a loss it attributes to a single trade on a thin Korean pre-market venue rather than a failure in its systems.
• Ionic Digital jumps 26% in Nasdaq debut, giving Celsius Network claimholders an exit route (CoinDesk): Ionic Digital (IOND), the bitcoin miner formed out of Celsius Network’s bankruptcy, rose 26% on its Nasdaq debut, valuing the company at $2.8 billion following the largest direct listing on the exchange since 2021.
• Chip stocks shed more than $1 trillion as selloff hits companies powering AI boom (CNBC): The world’s most valuable chip stocks have seen more than $1 trillion wiped from their market caps this week. The selloff was led by Nvidia with $238 billion. SK Hynix, Samsung Electronics and Micron lost $176 billion, $173 billion and $113 billion, respectively.

The chart on the left shows swings in the U.S. 10-year yield, the benchmark borrowing cost, in candlestick format. The chart on the right represents the two-year yield, which is more sensitive to near-term interest rate expectations.

Both have topped trendlines, representing a trend of pullbacks that began nearly three years ago in October 2023.

The breakout, therefore, indicates that the temporary breather is over and the broader upswing of interest rates that began in 2021 could soon pick up pace.