UBS Rate Hike Forecast Triggers Pressure on Bitcoin Through Year-End

UBS Global Wealth Management has updated its forecast to include two Federal Reserve rate hikes this year, one in September and another in December. This hawkish reversal could put pressure on Bitcoin through the end of the year.

The change in UBS's forecast comes after strong August labor data, which is seen as a key factor in the Fed's decision-making process. According to the Bureau of Labor Statistics, employers added 162,000 jobs in August, with unemployment holding steady at 4.1%. This has given policymakers more room to focus on inflation and maintain restrictive conditions.

UBS expects another rate hike in December, which could keep yields elevated and make dollar-denominated interest-bearing assets more attractive. For Bitcoin, this means that investors may have to weigh the cost of holding a non-yielding asset against interest-bearing alternatives through 2026.

The risk for Bitcoin is that higher expected US rates will keep Treasury yields supported, preserve the appeal of dollar assets, and make investors less willing to take on risk. This could lead to a decrease in demand for Bitcoin, putting downward pressure on its price.