Bitcoin fell as much as 3% to $62,913 on Wednesday before recovering to $63,795 as traders braced for the Federal Reserve's July policy decision. The Fed has held its benchmark rate at 3.50% to 3.75% since December, but this meeting — only the second under Chair Kevin Warsh — carries unusual uncertainty. Futures markets assign roughly a one-in-three probability to a quarter-point rate hike, a level of division not seen since September 2024.
Rate hike odds narrow
Bank of America noted that the market has priced only about 10 basis points of tightening, far short of the 25 basis points for a standard hike. That makes a surprise move a bigger risk. Block Scholes put the probability of a hike at 33.7%, pointing out that only two Fed meetings since 2015 have had such close market division before a decision. The most recent was September 2024, when traders were split between a 25- and 50-basis-point cut — the Fed chose the larger move.
Warsh's style on display
Warsh has rejected conventional forward guidance, preferring to respond to incoming data and encouraging 'good debate' among policymakers. That approach has left the market guessing. Jim Bianco argued that under Warsh, a 35% to 40% probability of a hike is reasonable despite limited futures pricing, and that keeping rates unchanged would not end the debate. Citadel Securities forecasts a 25-basis-point increase, arguing it would strengthen Warsh's inflation-fighting credentials and demonstrate the Fed does not need to prepare markets for every move.
ETF outflows signal caution
US-listed spot Bitcoin ETFs recorded about $477 million of net outflows over the past three trading sessions ahead of the decision. Santiment data shows crypto-market anxiety intensified around the meeting, with social discussion on rate hikes surging. Despite the jitters, Bitcoin has risen roughly 9% in July. The S&P 500 was broadly unchanged over the same period, while a basket of semiconductor stocks fell almost 20%.
Political praise and market memory
President Trump praised Warsh as 'fantastic' and said he 'wants to do the right thing,' while criticizing other policymakers for resisting lower rates. Bank of America estimates that a July hike could push the amount of tightening priced for 2026 from roughly 45 basis points to around 60 basis points. The decision is due later today. If the Fed does hike, it will be the first move since December — and a test of whether Warsh's data-dependent style can handle a market that isn't sure what to expect.
