US Fed Rate Hike Probability at 94.5%, Bitcoin Faces Pressure at $70K

The likelihood of a 0.25 percentage point interest rate increase by the US Federal Reserve has surged to 94.5%, with Wall Street treating the move as a given.

According to blockchain media Decrypt, if implemented, the federal funds rate would rise from its current range of 3.50% to 3.75% to 3.75% to 4%. The Federal Open Market Committee (FOMC) concluded a two-day meeting on Wednesday, with CME FedWatch showing the probability of a hike jumping from under 50% a month ago to 94.5%.

Major banks surveyed by the Wall Street Journal anticipate a September rate hike, with Barclays, Citigroup, JPMorgan, Morgan Stanley, and UBS forecasting an additional 50 basis points by year-end. Bank of America, Deutsche Bank, and RBC expect 75 basis points more, while Goldman Sachs predicted only this month's 0.25% increase.

Market focus has shifted to the future path of interest rates rather than the upcoming hike itself. Higher rates could dampen consumption and weigh on risk assets like Bitcoin that thrived in low-rate environments. Meanwhile, safer assets such as government bonds may attract capital away from risky investments.

The surge in rate hike expectations follows strong inflation data: August consumer price index (CPI) rose 3.4% year-on-year, with core inflation at 2.5%, both exceeding the Fed's 2% target. Geopolitical tensions with Iran also contributed to rising oil prices and further inflationary pressure.

Despite the Fed holding rates steady in July with a 9-3 vote split—three policymakers advocating for a hike—the recent strong August jobs report has intensified expectations of tightening. Political pressures are mounting as President Donald Trump publicly pushed for rate cuts, alongside Vice President JD Vance and Treasury Secretary Scott Bessent.

Market reactions have already begun: US 10-year Treasury yields hit a 2007 high of 5.04%, while the two-year yield reached its highest since July 2024. Higher bond yields could weaken crypto's appeal as dollar strength increases, putting pressure on Bitcoin.

Bitcoin has already shown weakness, trading around $75,700 amid a 3.2% daily decline. The cryptocurrency also faces headwinds from the failure of the Clarifying Law Act to pass Senate cloture votes. Bitcoin is now significantly below its September high of approximately $82,000.

Some analysts argue that this rate hike may not be entirely negative for crypto if it focuses on stabilizing long-term Treasury yields rather than drastically tightening financial conditions. The market will closely watch whether the Fed's decision and Chair Kevin Warsh's press conference deliver unexpected signals beyond current expectations.