The Fed Just HIKED Rates — What Happens to Bitcoin Now?

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Welcome back to the Daily Crypto Deep Dive, and tonight we have one of the biggest macro stories for crypto markets this year. The Federal Reserve has officially raised interest rates for the first time in more than three years, increasing its benchmark rate by 25 basis points, and taking the federal fund's target range from 3.5 to 3.75%, up to 3.75 to 4%.

But if you only look at that headline, you are missing the real story, because the rate hike itself was almost completely expected. What matters far more for Bitcoin, Ethereum, XRP and the wider financial markets is what the Federal Reserve has just told us about what comes next. And on that front, the message was considerably more hawkish. The Fed thinks inflation is still too high, the economy is strong enough to absorb tighter policy, and most policy makers now believe rates will need to rise again before the end of the year.

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Terms and eligibility apply depending on your region. And as always, nothing in this episode is financial advice. Crypto is volatile, so always do your own research. The first thing that jumped out from this meeting was the vote. This was not a divided Federal Reserve reluctantly pushing through a controversial hike. The decision was unanimous. Every voting member of the Federal Open Market Committee supported taking rates higher. That is significant because it tells us that concerns about inflation have become broad enough across the committee to overcome whatever differences existed previously. And the Fed used particularly revealing language in its statement, saying the increase should support a more timelier return of inflation to its 2% objective. The statement also removed earlier language specifically attributing elevated inflation to supply shocks such as energy. That change may sound technical, but it matters. It suggests the Fed is becoming less comfortable treating inflation as something that will simply disappear when temporary shocks fade. Then we got the dot plot, and this is arguably the most important part of the entire announcement. Of the 18 policy makers who submitted interest rate projections, 16 now expect at least one further rate increase during 2026 Only two expect rates to remain where they are after today.

The median projection points towards another 25 basis point increase, which would take the federal funds range to approximately 4 to 4.25 percent by the end of this year. Even more importantly, that median rate is projected to remain around the same level through the end of 2027

Back in June, policy makers were effectively anticipating one hike during 2026 followed by a quarter point cut in 2027

That cut has now disappeared from the median projection. In other words, the Fed is not just saying rates need to go higher. It is saying they may need to stay higher for longer. And the reason becomes much clearer when you look at the new economic forecasts. The Fed actually upgraded its forecast for economic growth. Real GDP growth for 2026 is now projected at 2.3% compared with 2.2% previously, while growth in 2027 is projected at 2.4%.

At the same time, the Fed lowered its expected unemployment rate for the end of this year from 4.3% to 4.1%.

That combination is critical. Normally, the major risk when raising interest rates is that you crush economic activity or push unemployment sharply higher. But the Fed is currently forecasting stronger growth and lower unemployment while simultaneously raising rates. That gives policymakers much more room to keep fighting inflation because according to their own projections, the underlying economy is still holding up remarkably well.

Inflation is where the problem remains. The Fed increased its 2026 projection for headline PCE inflation from 3.6% to 3.7%.

And perhaps the most important long-term detail of the entire projection set is that policymakers no longer expect inflation to return fully to their 2% target until 2029

That is a year later than previously expected.

So, imagine the situation from the Fed's perspective. Economic growth is still above 2%.

Unemployment is only expected to be around 4.1%.

Consumers are still spending. But inflation is substantially above target and may take another 3 years to return completely to 2%.

That is almost the textbook environment for a central bank to argue that monetary policy needs to remain restrictive.

Now, we get to what all of this means for Bitcoin. Because this is where things become much more complicated than simply saying higher interest rates equal lower crypto prices. Higher rates are generally a headwind for Bitcoin and other risk assets. If investors can earn attractive returns on cash or short-dated government debt with considerably less volatility, speculative assets have to offer a more compelling potential return to attract the same capital. Higher rates also increase the cost of leverage throughout the financial system. That affects hedge funds, trading desks, businesses and consumers. Less cheap money generally means less liquidity looking for somewhere to go. And historically, abundant liquidity has been one of the most powerful environments for cryptocurrency markets. But markets do not trade headlines. They trade differences between expectations and reality. And that explains why the immediate reaction tonight has been much calmer than somebody might expect after hearing the words Federal Reserve Rate Hike. The 25 basis point increase was already heavily anticipated. After the announcement, the S&P 500 was actually around 0.3% higher, and the Nasdaq around 0.7% higher. The 2-year treasury yield was roughly unchanged, around 4.66%, while the 10-year treasury yield was down roughly 4 basis points at around 4.96%.