Bitcoin dips as Fed signals rate hike in 2026 under new chair Warsh

Bitcoin fell after the Federal Reserve held rates steady but signaled a potential increase later this year, with nine of 18 officials projecting the federal funds rate would end 2026 above its current 3.50%-3.75% range.

"I did not submit a dot for me. It's not helpful in the conduct of policy," Chair Kevin Warsh said in his first press conference since taking office, confirming he abstained from offering his own rate projections.

The median projection now calls for the federal funds rate at 3.8% by year-end, up from 3.4% in March. Inflation by the personal consumption expenditures price index is seen at 3.6% by year-end, compared with 2.7% previously. Core PCE, which strips out volatile food and energy prices, is forecast at 3.3%. Consumer prices overall rose 4.2% in May from a year ago, the biggest annual increase since April 2023.

Higher rates make yield-bearing assets like Treasuries more attractive relative to Bitcoin, which offers no yield. The shift in Fed posture removes the prospect of rate cuts that some crypto bulls had hoped would drive liquidity into digital assets. Six of the nine hawkish officials feel more than one quarter-point hike will be needed this year, according to the projections published Wednesday.

The policy statement underwent a far more extensive rewrite than typical, with Warsh signaling a desire to overhaul the central bank's communications strategy. The Fed chief said the central bank plans to review its practices by year-end, including press conferences, the dot plot, meeting schedules, transcripts and minutes. He said he was "open-minded" about potential changes.

The hawkish turn poses a challenge for Warsh, who was nominated by President Donald Trump with the expectation he would push for lower rates. A wartime spike in energy prices after the Iran conflict snarled tanker traffic through the Strait of Hormuz has pushed rate cuts off the table. Gasoline prices remain more than $1 a gallon above pre-war levels, according to AAA data.

Traders have repriced rate expectations accordingly, now seeing a hike as likely by September. The dollar extended gains after the decision, adding pressure on risk assets including cryptocurrencies. Bitcoin's correlation with the Nasdaq 100 has remained elevated through 2026, meaning tighter financial conditions tend to weigh on both equity and crypto markets.

Warsh's predecessor, Jerome Powell, has elected to remain on the Fed's governing board after his term as chairman expired, a move designed to serve as a firewall against White House pressure to lower rates. Powell has promised to keep a low profile.

This article is for informational purposes only and does not constitute investment advice.