Fed Rate Hike Probability at 93%... What's Next for Bitcoin?

Interest rate futures indicate a 92.7% probability that the Federal Reserve will raise rates on Wednesday. This has caused tension across cryptocurrency and stock markets. Donald Trump appointed Kevin Warsh with one promise: to lower interest rates. However, with inflation at 3.4%, Warsh cannot fulfill this pledge.

Why Warsh's best option may be a rate freeze: The Fed's target range is 3.50% to 3.75%. CME FedWatch tools showed a 7.3% probability of a rate hold and 0% for a cut as of Wednesday morning.

Trump appointed Warsh, who was seen taking office at the White House in May. Before his appointment, Trump already viewed Warsh as an ally.

Wharton School professor Jeremy Siegel argues that Trump's pressure and midterms are the only obstacles to a rate hike. White House Economic Advisor Christopher Pelland called this week's hike a mistake. With seven weeks until midterms, market sentiment remains cautious.

Former Fed official Stephen Miron cited data-based arguments for raising rates in a recent interview.

Unexpected data can move Bitcoin and gold: Interest rate expectations determine the cost of holding non-yielding assets like Bitcoin and gold. When currency becomes cheaper, prices tend to rise.

Bitcoin was trading near $76,022 at the time of writing, down 1.17% over 24 hours. Gold traded around $4,340 per ounce, up 1.4% for the day.

August inflation data released on September 11 showed how quickly both assets reacted: Bitcoin dropped from about $77,100 to $76,050 within a minute. Gold fell from $4,353 to $4,292 before rebounding.

KPMG Senior Economist Diane Swink told AP that the current hike could lower long-term rates. The market will focus on Warsh's press conference remarks rather than the 0.25 percentage point rate change itself.