Bitcoin enters Fed meeting week, interest rate hike expectations soar

Core Points

Bitcoin remains strong after repeated tests around US$76,380. The FedWatch tool shows that the probability of raising interest rates is as high as 86.5%. Forecasters from 16 listed institutions believe that interest rates will rise in September. Goldman Sachs currently expects to raise interest rates by 25 basis points. The Fed's economic projections may determine the direction of market response.

Goldman Sachs joins the "September rate hike" camp

According to the Wall Street Journal, Goldman Sachs has adjusted its September forecast from "unchanged" to "raising interest rates by 25 basis points." Goldman Sachs said the consumer price index (CPI) data had only a slight impact on its core personal consumption expenditure (PCE) forecast, but concluded that if the Fed chooses to sit tight when the market is generally expected to raise interest rates, it may make investors uneasy.

This change in forecast comes as August inflation data reinforced the need for tightening policy. The latest CPI report showed prices rose 0.4% for the month, while the annual headline and core inflation rates were 3.4% and 2.4%, respectively.

The Federal Reserve is scheduled to hold a meeting from September 15 to 16, during which it will release updated economic forecasts. The statement will be released at 18:00 UTC on September 16, followed by a press conference by the chairman in 30 minutes. The forecasts will show whether officials view the September meeting as an isolated response to inflation or part of a longer-cycle tightening path.

Futures markets strongly tend to raise interest rates

The CME FedWatch tool shows that as of September 14, the implied probability of the Fed raising its target interest rate range from 3.50%-3.75% to 3.75%-4.00%(i.e., a 25 basis point rate increase) is 86.5%. The probability of maintaining the status quo is 13.5%, so the decision has not yet been settled, but the futures market is clearly inclined to raise interest rates once.

A table provided by The Wall Street Journal and shared by CryptosRus lists 20 forecasters, 16 of whom expect the next Fed move will be a rate hike in September. The 50 basis points and 75 basis points mentioned in the table refer to the expected total policy changes in 2026, rather than the size of a single change in September. So this points to the view that further austerity measures may follow after September; it should not be interpreted as a consensus that a 50-or 75-basis point rate hike will occur next week.

Insight: The vast majority of Wall Street institutions tend to favor the Federal Reserve to raise interest rates in September. Most major banks now expect a cumulative rate increase of 50 basis points, with Bank of America and Royal Bank of Canada (RBC) expecting a rate of 75 basis points. Goldman Sachs and JPMorgan Chase are more cautious, expecting 25 basis points.

Impact on Bitcoin: The key is the signal, not the single action

For Bitcoin, the important difference is whether the market expects a single rate hike or whether the Federal Reserve sends a signal that there will be multiple rate hikes in the future. If the status quo remains, futures markets need to be re-priced quickly. A 25 basis point rate hike and in line with FedWatch's expectations may have a small initial market reaction, but if forecasts or press conferences indicate further rate hikes will be set later this year, it could still put pressure on risky assets.

Bitcoin is approaching this uncertainty area near the first support level formed by its latest rally.

Bitcoin's first retracement is under pressure

At the time of writing, the BTC/USD daily chart shows that Bitcoin is trading at close to US$77,300, having previously moved towards US$76,380 multiple times-this is the 23.6% Fibonacci retracement level of the rally from a June low of approximately US$57,766 to an August high of approximately US$82,130.

It hit about US$76,480 in the latest trading session, and then rebounded above that level. This response suggests buying remains active near support levels, but this has not yet been confirmed to form a solid foundation. Each review may attract demand, but frequent testing may also weaken previous efforts to maintain that level.

Key bitcoin price before and after the Federal Reserve's decision

• US$76,380: Immediate support level
  This is the 23.6% retracement level. Holding this position will keep the correction shallow; if the daily line closes below this level, it will weaken the current attempt at recovery more severely than a brief intraday shadow line.
• US$72,820: Next downside reference point
  This is the 38.2% retracement level and the next major Fibonacci level. Reaching this position will represent a deeper correction, but does not necessarily mean a reversal of a larger trend.
• US$69,950 -71,170: The larger support cluster
  is located at the 50% retracement level of approximately US$69,950, immediately adjacent to the 200-day moving average of approximately US$70,140 and the 50-day moving average of approximately US$71,168, forming a more substantial technical support area below US$72,820.
• US$79,500 -80,000: First recovery resistance zone
  This zone contains recent price resistance and downtrend lines from August highs. If the daily level can be recovered, it will weaken the recent series of lower highs and improve the short-term structure.
• US$82,130: A break through the August high
  will end the current correction and put Bitcoin into a new range high area.

The current structure puts Bitcoin at a narrow margin at US$76,380. Losing that level would make the 38.2% retracement the next reference point, while a break through the downtrend line suggests that the correction is losing control of the daily chart.

Bitcoin's response depends more on surprises than the rate hike itself

Looking back at the historical record of 2022-2023, the "unexpected degree" of interest rate decisions is often more important than the decision itself. In the historical comparison between the Federal Reserve's interest rate hike and Bitcoin, the March 2022 interest rate hike was fully expected, resulting in a dull immediate response. The shift from the expected 50 basis points to 75 basis points in June 2022 caused greater disruption as the market had to re-price possible paths within days.

Later patterns were reversed. As investors focus on the slowing pace of tightening and the prospect of a cycle approaching its end, Bitcoin rallied in early 2023 amid expected interest rate hikes.

A 25-basis point rate increase in line with futures expectations could resolve immediate doubts, but would keep the expected path after September open. Forecasts, inflation forecasts and the chairman's wording about follow-up meetings are more likely to change that expectation.

Fed information will test Bitcoin support

This meeting may drive Bitcoin's trend in a number of ways. If the rate hike is 25 basis points and is in line with futures expectations, market attention may be focused on whether the US$76,380 will continue to attract buyers. Maintaining the status quo, or guidance showing a stricter tightening than investors expect, will force traders to reassess current ranges more quickly.

If it continues to stand firm above $76,380, the correction will be limited to near the first retracement level. If the daily close below this level, attention will shift to US$72,820; if the sell-off extends further, the support cluster of US$69,950 -71,170 will become relevant. Traders will focus on the inferred interest rate path after the meeting: including forecasts, inflation forecasts and the chairman's guidance on subsequent decisions.

This document is for informational purposes only and does not constitute financial or investment advice.