Warsh's Rate Decision Hits Bitcoin with Fresh Headwind

The Federal Reserve's decision to hold interest rates steady under new chair Kevin Warsh may be bad news for Bitcoin. The Fed's committee members project a rate hike before year-end, and the markets are pricing in only a 15% chance that rates stay flat through December.

Analyst Benjamin Cowen argues that the pricing-in of a rate hike itself is a headwind for Bitcoin, regardless of whether it actually happens. The cryptocurrency depends on loose monetary policy to outperform, but the two-year Treasury yield has been moving higher, forcing the Fed to follow with hikes.

Cowen also notes that the US dollar is forming a base at current levels and showing signs of breaking out, which historically compresses crypto and risk asset prices. A stronger dollar, combined with inflation sitting above 2% for the entire period since 2021 and no clear path down, makes it less likely for Warsh to cut rates.