Fed Meeting Puts Pressure on Warsh, Bitcoin May Benefit

Bitcoin fell almost 3% to $75,800 in the 24 hours before the Federal Reserve’s rate decision, after the Senate’s defeat of the Clarity Act removed a potential source of support for the cryptocurrency.

Market expectations and the Fed’s dilemma

Financial markets have almost fully priced in a 25‑basis‑point rate increase, which would raise the federal funds target range to 3.75%‑4%, according to the CME’s FedWatch tool. Major investment banks also expect at least one more hike before year‑end.

Robin Brooks, a senior fellow at the Brookings Institution, said the primary narrative is not today’s hike but the additional tightening expected later in the year. He warned that the Fed chair, Kevin Warsh, faces a “nightmare” in delivering a message that satisfies the aggressive pricing already reflected in markets.

Potential impact on the dollar and yields

A less hawkish tone could weaken the U.S. dollar and push long‑duration Treasury yields higher. A weaker dollar typically supports dollar‑denominated assets such as bitcoin and gold, reflecting the negative correlation between digital assets and the U.S. Dollar Index (DXY).

Long‑term yields are already near 5% on the 10‑year Treasury, up about 80 basis points this year, driven largely by U.S. debt concerns. If the Fed hikes without clear forward guidance, investors may view policy as still too accommodative, prompting expectations of more aggressive tightening and further yield rises.

Implications for bitcoin and other crypto assets

Higher yields driven by inflation concerns, rather than optimistic growth, may not penalize non‑yielding assets like bitcoin and gold. Both assets could recover after an initial risk‑off reaction, as they are often seen as sovereign hedges and stores of value.

Other digital assets also felt pressure, with tokens such as JUP, XLM, and ICP each falling about 10%.