Bitcoin is facing renewed pressure as traders raise the odds of a Federal Reserve rate hike at the September 15-16 Federal Open Market Committee (FOMC) meeting.
CME FedWatch data showed the probability of a 25-basis-point hike climbing to around 66%-70% in early September, which is up from 35% before Federal Reserve Chair Kevin Warsh’s Jackson Hole speech.
Bitcoin fell below $78,000 after Warsh’s August 28 remarks, dropping more than 3% during the session as Treasury yields moved higher and traders priced in a more hawkish Fed.
Federal Reserve Board members are scheduled to meet on September 15 and 16, with the policy decision and press conference set for September 16.
Fed Rate Hike Odds Jump After Jackson Hole
Rate expectations shifted sharply following Warsh’s Jackson Hole speech on August 28.
Source: CME FedWatch
Before the speech, markets were pricing roughly a 35% chance of a September rate hike. Those odds moved to about 60% shortly afterward, then doubled to 70% by September 2 Wednesday.
Warsh said the Fed’s preferred inflation measure remained well above its 2% target and that recent softer inflation readings had not convinced him that the underlying trend had improved.
In his official Jackson Hole remarks, Warsh said 12-month Personal Consumption Expenditures (PCE) inflation stood at 3.7%, while the six-month rate was running at 4.1%. He also noted that 54% of the components in the PCE basket had risen by more than 3% over the previous year.
The Fed left rates unchanged at its July meeting, but three officials voted for a 25-basis-point increase.
Bitcoin Falls as Higher Rates Return to Focus
Bitcoin fell below $78,000 after Warsh’s speech, with prices briefly moving toward $77,000 as markets adjusted to the possibility of tighter monetary policy.
Higher interest rates can put pressure on Bitcoin and other risk assets because they increase the returns available from lower-risk investments such as U.S. government bonds.
The move in rate expectations also pushed short-term Treasury yields higher. The two-year Treasury yield rose from around 4.22% to 4.35% after the Jackson Hole speech.
Crypto markets also saw increased liquidations during the move, with around $488 million in leveraged crypto positions liquidated, including more than $360 million in long positions, as Bitcoin moved lower.
Oil and Inflation Add to the Fed’s Concerns
The Fed’s September decision is also being complicated by higher energy prices and geopolitical tensions.
Brent crude moved back above $90 per barrel as conflict involving the U.S. and Iran raised concerns about energy supply and renewed inflation pressure.
Higher oil prices can feed into transportation, manufacturing and consumer costs, making it harder for the Fed to bring inflation back toward its 2% target.
The latest Fed Beige Book also showed that prices continued to rise across most Federal Reserve districts, while economic activity increased slightly.
Jobs and Inflation Data Could Change the Outlook for Bitcoin
The September rate decision is not yet settled or priced in, as markets are focused on the August employment report and upcoming inflation data this Friday from the Bureau of Labor Statistics (BLS), which could shift rate expectations again before the FOMC meeting.
A weaker-than-expected jobs report could reduce the case for another hike, particularly if it points to a sharper slowdown in the labor market.
Markets expect the August jobs report to show roughly 53,000 new jobs with unemployment holding at 4.1%. The table below shows how different outcomes could affect Fed expectations and Bitcoin:
| Scenario | Jobs Data | Likely Fed Read | Possible Bitcoin Reaction |
| Bullish Case | Payrolls below ~30K, unemployment rises above 4.1% | Weaker labor market could reduce September hike odds | Bitcoin could rebound as yields and the dollar ease |
| Mid Case | Payrolls around 40K-70K, unemployment stays near 4.1% | Data broadly matches expectations, leaving Fed odds little changed | Bitcoin may stay range-bound with volatility around the release |
| Bearish Case | Payrolls above ~90K, unemployment falls below 4.1% | Strong labor data could strengthen the case for a September hike | Bitcoin could face renewed pressure as yields and hike odds rise |
Table 1. Bitcoin Reaction Scenarios for the September 4 Jobs Report
Notably, Bank of America has said the upcoming CPI report could be more important for the September decision than the jobs report, particularly if inflation remains elevated.
What Comes Next
Traders will be watching the Fed rate odds closely ahead of the September 15-16 meeting.
A hotter inflation reading or stronger labor data could strengthen expectations for another rate increase and keep pressure on Bitcoin, particularly if Treasury yields and the U.S. dollar continue moving higher.
Softer economic data could have the opposite effect by lowering rate-hike expectations and reducing some of the macro pressure on crypto markets.
| Scenario | Fed Decision | Policy Signal | Possible Bitcoin Reaction |
| Bullish Case | Fed holds rates steady | Kevin Warsh signals patience and softer inflation risks | Bitcoin could rally as expected tightening is priced out |
| Mid Case | 25 bps hike | Fed delivers the expected hike but avoids signaling more near-term tightening | Initial volatility, followed by consolidation if the hike is already priced in |
| Bearish Case | 25 bps hike | Fed signals additional hikes may be needed because inflation remains too high | Bitcoin could fall as Treasury yields and the dollar move higher |
Table 2. Bitcoin Reaction Scenarios for the September FOMC Meeting
What this means for you: Bitcoin is now trading around a Fed decision that markets increasingly expect could deliver another rate hike. The biggest near-term catalysts are the upcoming jobs and inflation reports, which could quickly change both rate expectations and Bitcoin’s direction.
