Kevin Warsh announced the Fed’s decision to hold rates steady at his first FOMC meeting Wednesday and deliberately avoided forward guidance, leaving markets to price in a rate hike by year-end as Bitcoin (CRYPTO: BTC) faces a fresh headwind.

Warsh Killed Forward Guidance and Nine Committee Members Want a Rate Hike

The FOMC statement under Warsh ran barely half a page compared to the page-and-a-half releases under Jerome Powell. 

Warsh did not add his own position to the dot plot. Nine committee members already project a rate hike before year-end, and the CME FedWatch tool shows markets pricing only a 15% chance that rates stay flat through December.

Analyst Benjamin Cowen argued Wednesday that the pricing-in of a rate hike is itself the headwind, regardless of whether one actually happens. 

Bitcoin depends on looser monetary policy to outperform, and the two-year Treasury yield heading back up historically forces the Fed to follow with hikes. The two-year yield has been moving higher, repeating a pattern seen before rate hike cycles in the 1960s and late 1990s.

The Dollar Is Forming A Base That Could Add More Pressure On Risk Assets

Cowen flagged the US dollar forming a massive base at current levels and showing signs of breaking out. 

A stronger dollar historically compresses crypto and risk asset prices. Combined with inflation sitting above 2% for the entire period since 2021 and no clear path down, Warsh faces a situation where cutting rates would likely send long-end yields higher as bond vigilantes push back.

“Inflation is a choice,” Warsh said during the press conference. His comments suggest he is less focused on decimal precision in inflation prints and more focused on the broader trajectory, which has not broken below 2% since 2021.

Why This Matters For Bitcoin Right Now

Cowen noted that after a new Fed chair assumes the role, the S&P 500 often tests that chair with a correction. 

The back half of midterm years historically brings weakness, and June marks the beginning of that window. 

If the market throws Warsh that curveball, it tests whether he raises rates in the face of persistent inflation or runs policy hot, which would push long-end yields higher either way.

Both paths are negative for Bitcoin in the near term. The only positive scenario requires oil prices staying down after the Iran deal and inflation cooling enough to take rate hike odds off the table entirely.

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