Fed Rate Decision Set to Spark Another Crypto Selloff: Bitcoin Price Action Reveals the Pattern
The Federal Reserve's decision to maintain interest rates has had a significant impact on the cryptocurrency market. In January 2026, President Donald Trump nominated Kevin Warsh, a former Federal Reserve governor who is considered pro-crypto, as the new Chair of the Federal Reserve. However, crypto markets did not take this announcement favorably, expecting higher rates for longer.
As a result, Bitcoin's price fell by 7% from $84.6k to $78.7k, with the wider crypto market recording its highest liquidations in 2026, surpassing even August's figures. A total of $2.407 billion in long positions were liquidated compared to just $154.7 million in short positions.
The Federal Reserve has a significant influence on interest rates, and the FOMC sets the U.S. national monetary policy. Raising rates is typically bearish for risk assets like crypto, making borrowing costs higher to cool down inflation. Rate cuts have the opposite effect, making capital cheaper to stimulate growth, which can be bullish for crypto but may raise inflation over time.
The next FOMC meeting will take place on September 15th-16th, with a 65.2% probability of keeping interest rates at 3.50%-3.75%, and a 34.8% chance of a rate hike to 3.75%-4.00%. Bitcoin's price action has shown that most FOMC meeting days have been bearish pivots, with the exception of April, which saw a bullish uptick.