US Interest Rates 'Jump' to 88% Hike Probability... Can Cryptocurrencies Withstand the Sell-Off Warning?

▲ Bitcoin (BTC), Federal Reserve (Fed), Dollar (USD), Interest Rate/AI Generated Image

Goldman Sachs and JPMorgan have forecast an interest rate hike by the Fed. Bitcoin (BTC), Ethereum (ETH), and XRP are at a crossroads of increased volatility.

According to Coingape on September 14 (local time), two Wall Street investment banks projected that the Federal Reserve (Fed) would raise the benchmark interest rate by 0.25 percentage points at the September Federal Open Market Committee (FOMC) meeting. Goldman Sachs withdrew its previous forecast of a rate freeze. JPMorgan anticipated a 0.25 percentage point hike in December, following September.

The shift in outlook was influenced by stronger-than-expected Producer Price Index and Consumer Price Index figures for August. The ongoing conflict between the US and Iran also contributed to the sustained rise in international oil prices. At the time of writing, oil prices had climbed 3% in a day, exceeding $103 per barrel. The market's expected probability of a 0.25 percentage point rate hike this week also increased to approximately 88%, up from about 70% before the recent inflation data release.

Interest rate decisions are not limited to the Fed. The Bank of England and the Bank of Japan are also scheduled to announce their rate decisions this week. Goldman Sachs suggested that higher interest rates could tighten financial conditions and strengthen the dollar, potentially leading to sell-off pressure on Bitcoin, Ethereum, and XRP.

Policy variables are also in motion simultaneously. The US cryptocurrency market structure bill is scheduled for a procedural vote in the Senate on Tuesday. Bernstein analyzed that given the strong bearish sentiment in the market, positive news related to the bill could serve as a catalyst for a rebound. The bill requires 60 votes to pass. There are also observations that approximately 7-10 Democratic senators ultimately want the bill to pass.

Bernstein predicted that increased support from Democrats could strengthen the upward trend of Bitcoin, Ethereum, and XRP. Conversely, if the bill fails to pass and the Fed signals a hawkish monetary policy, cryptocurrencies and related stocks could once again come under pressure. The convergence of the Fed's interest rate decision and the vote on the US cryptocurrency market structure bill in the same week has emerged as a key variable to amplify market volatility.

[Article Summary]

-Goldman Sachs and JPMorgan expect the Fed to raise the benchmark interest rate by 0.25 percentage points in September.

-The market's implied probability of a 0.25 percentage point rate hike recently jumped from approximately 70% to about 88%.

-With the Fed's decision and the vote on the US cryptocurrency market structure bill coinciding, increased volatility is expected for Bitcoin, Ethereum, and XRP.

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