Daily Crypto Deep Dive: The Fed Could Raise Rates Again — What Happens to Bitcoin Now?

**SPEAKER_1** (0:00)
Welcome back to the Daily Crypto Deep Dive. For years, crypto investors have been told one simple story.
Interest rates will eventually come down, money will become cheaper, liquidity will return to the system, and Bitcoin will benefit.
But what happens if that story is wrong? What happens if the Federal Reserve does not cut interest rates at all?
And more importantly, what happens if the Fed actually starts raising them again? That possibility is no longer some distant theoretical risk. It is now being openly discussed by Federal Reserve officials. Financial markets are actively pricing it in. Inflation remains well above target. And some analysts believe the United States could see multiple additional rate increases before the end of 2026 So today, we are going to explain exactly why interest rates could be going higher, why inflation refuses to disappear, what the war with Iran and the Strait of Hormuz have to do with your crypto portfolio, why Bitcoin cares so much about the decisions made by a group of central bankers in Washington, and most importantly, what could actually happen to Bitcoin prices if rates rise again.
Because whether you like central banks or hate them, whether you believe Bitcoin was created to escape them or not, there is one uncomfortable truth. Right now, the Federal Reserve can still move the Bitcoin market. The Federal Reserve's benchmark interest rate currently sits between 3.5% and 3.75%.
The next major piece of the puzzle arrives with the June inflation report, followed by the next Federal Reserve meeting on July 28th and 29th. And suddenly, the possibility of another rate hike is very real.
Federal Reserve Governor Christopher Waller has warned that if the latest core inflation data shows another hot reading, the Fed may need to consider tightening monetary policy in the near term. Markets responded immediately. During Waller's remarks, expectations for a July rate increase jumped, with rate futures pricing in as much as a 45% probability of a hike at the July meeting.
Traders now see very strong odds of higher rates by September. And before we get into exactly why that matters for Bitcoin, remember that anyone who signs up to Kraken through our link and completes the required steps can receive 20 XRP from us as part of our listener promotion. Full details are in the episode description. Now, to understand why the Federal Reserve might raise rates, we first need to understand what it is actually trying to do.
The Fed has two major jobs, maintaining maximum employment and keeping inflation under control, with a long-term inflation target of 2%.
Inflation, however, is still far too high. In May, headline US inflation was running at 4.2% annually. Core inflation, which strips out food and energy because they can be especially volatile, was running at 3.4%.
That alone is a problem. But what concerns people like Waller even more is that inflation appears to be broadening throughout the economy.
According to his analysis, almost 70% of categories within core services were experiencing inflation above 3% on both a 3-month and 12-month basis. That is important because the Fed can sometimes look through a temporary spike in one particular area. If the price of oil jumps for a few weeks because of a war, the Fed does not necessarily need to immediately raise interest rates. But if prices are rising across rent, insurance, health care, services, wages and other parts of the economy, that starts to look much more persistent. And persistent inflation is exactly what the Federal Reserve fears. Then we have the Iran conflict and the Strait of Hormuz. A significant amount of the world's oil passes through this narrow waterway.
If shipping is disrupted, oil prices can rise. Higher oil prices increase transport costs. Businesses then pay more to move goods. Airlines pay more for fuel. Factories pay more for energy. Consumers pay more at petrol stations. Those increased costs can gradually work their way through the entire economy.
And the Fed faces an extremely difficult problem. It cannot produce more oil. It cannot end a war. It cannot reopen a shipping route. The main weapon it has is interest rates. By raising interest rates, the Fed makes borrowing more expensive. Mortgages become more costly. Car loans become more expensive. Business financing becomes harder. Credit card debt becomes more painful. Companies may invest less. Consumers may spend less. And overall demand in the economy can cool. That sounds brutal because frankly it is. The idea is essentially to slow the economy enough that businesses lose some of their ability to keep increasing prices. But now we get to the important question for this podcast. Why does any of this affect Bitcoin? Bitcoin does not have a central bank. It does not pay interest. There will never be more than 21 million Bitcoin. Jerome Powell, Kevin Warsh or any future Federal Reserve chair cannot simply create more of it. So why should Bitcoin care whether US interest rates are 3%, 4% or 5%?