Bitcoin Stays Strong Despite Rate Hikes

The Fed's dot plot shows a year-end rate projection of 4.1%. With the current target range at 3.75–4%, this implies one more rate hike. With two FOMC meetings left this year, a single additional increase is on the table. The outlook for next year also leans toward further hikes.

The Fed does not yet have sufficient confidence that inflation will reach its 2% target. It has therefore reaffirmed that it must keep raising rates until the target is met, placing price stability as its top priority. The Fed said its decisions rest on independent judgment based on economic data.

The U.S. labor market remains resilient, giving the Fed room to maintain its tightening path. The Fed remains wary of entrenched inflation and has made clear that price stability takes priority over employment. This stance signals strong resolve to keep raising rates.

The Fed's hawkish remarks were largely expected, and markets appear to have already priced much of them in. The odds of another hike barely changed, and investors read the outcome as the removal of uncertainty and an end to bad news, which helped bitcoin defend its price. This suggests markets have entered a phase where they are no longer strongly swayed by rate hikes.

Goldman Sachs reversed its earlier view that the tightening cycle would end with a September hike, and now expects another 25 basis point increase in October. Bank of America also expects hikes in October and December, extending the tightening outlook held by major investment banks.

The yield on long-term Treasuries, which broke above 5% right after the rate announcement, has fallen back below 5% and regained stability. This shows the market reading the Fed's policy as removing uncertainty and bad news, with confidence in the Fed recovering. Stability in long-term yields could serve as a positive signal for the market going forward.

Bitcoin is being assessed as a better long-term hedge than gold. With persistent inflation concerns driving rate hikes, analysts argue bitcoin is absorbing defensive demand against that inflation.

As bitcoin is re-examined as a long-term inflation hedge, this is driving inflows from younger investors.

Mike McGlone argues that as high-yield (5%) bonds grow more attractive, risk assets such as bitcoin lose appeal. Raoul Pal, by contrast, views bitcoin as an inflation hedge rather than a risk asset. Experts fundamentally disagree on how bitcoin should be valued after rate hikes.

Nexwin Research Japan analyzes that bitcoin's near-term direction depends less on rate hikes than on how well the market absorbs selling pressure. This underscores that supply-demand balance matters more for pricing. The market's ability to absorb sell-side supply is identified as the key factor that will determine bitcoin's short- and medium-term direction.

According to a Crypto Slate report, bitcoin's four main demand channels are all weakening at once. ETF outflows have emerged, stablecoin supply has stalled, and corporate buying has also started to slow. This weakening of demand channels raises concern that investor sentiment could contract further.

Citing market cycles and improvements in on-chain structure, Grayscale argued a shift to a bull market is possible and advised clients to significantly expand their crypto allocations. This is read as a positive signal for long-term bitcoin investment.

CoinDesk analyzes that the current bitcoin market is reproducing a dead-cat bounce pattern similar to the early decline of 2022. This warns of a short-term rebound followed by a second crash. It specifically cautions that a break below the $71,300 support level could accelerate the decline, urging investors to stay alert.

The bill would exempt transactions under $10 from tax reporting, which is expected to activate real-world payments and utility ecosystems. It is also expected to clarify tax guidance on mining and staking, and to create an environment that attracts corporate and institutional investors.

The bill currently excludes new purchase provisions and focuses on maintaining bitcoin assets that existing holders already own.

This is attributed to the founder of Aave's mention of an "Uber strategy" and expectations that the SEC and CFTC will take a more accommodating stance. Some players are moving to capture the market by expanding services before a regulatory framework is in place, and approvals such as the launch of single-stock futures products are also appearing.