Bitcoin Braces for Fed Rate Hike: What's Next?

Traders are bracing for a potential Federal Reserve interest rate hike on Wednesday, with a 92.7% chance of a rate increase, according to CME FedWatch tool. This has raised concerns across both crypto and stock markets.

The reason behind this hike is the high inflation rate, currently sitting at 3.4%. Despite pressure from President Trump, who appointed Kevin Warsh as his chosen candidate for Fed chair with a promise of cutting interest rates, Warsh may not be able to deliver due to the rising inflation.

Warsh's press conference will be closely watched by traders, and KPMG chief economist Diane Swonk believes that a hike now could pull long-term rates lower later. However, some experts, such as former Fed governor Stephen Miran, argue against hiking interest rates, citing an incoherent reaction function to the inflation data.

Bitcoin's price has been affected by rate expectations, and it is closely tied to gold. In August, when a hike was predicted, both Bitcoin and gold reacted negatively, with Bitcoin falling from $77,100 to $76,050 and gold sliding from $4,353 to $4,292.