Fed's Hawkish Stance Sets Stage for Potential Bitcoin Sell-Off
The US Federal Reserve is set to meet on September 15-16 and investors are bracing for the impact of potential rate hikes on risk-on assets like BTC. According to analysts at The Kobeissi Letter, all key economic data has been released in the past few weeks, and the combination points to a hawkish stance from the Fed.
The jobs report showed that the US economy added 162,000 jobs in August, exceeding expectations, while producer inflation surged to 5.4%, up from 4.8% in July. The CPI data confirmed consumer inflation remains above the Fed's 2% target at 3.4%. Oil prices also jumped past $100 per barrel.
BTC experienced massive volatility on Friday, dropping from $77,000 to $76,000 before rebounding to almost $80,000 and then slipping back to its starting point. The probability of a 25-basis-point rate hike initially jumped to 79% after the CPI release, with futures pricing odds at 87%, up from 72% before the inflation data.
The most obvious risk for bitcoin is higher rates supporting Treasury yields and the dollar while tightening financial conditions and reducing demand. However, the subsequent recovery could suggest that investors may have already priced in much of the anticipated rate hikes.