Bitcoin ticked below $66,000 overnight and dipped into the mid‑$65,000 range early Wednesday as investors braced for a Federal Reserve meeting that could mark the most hawkish turn in years.

Kevin Warsh is set to chair his first FOMC rate decision, with rates widely expected to hold unchanged even as he once favored cuts and Trump continues pushing the Fed toward lower rates.

Fed dot plot set to show waning support for 2026 rate cuts

Warsh’s debut meeting as Fed chair arrives amid a sharp reversal in policy expectations. Markets expected multiple rate cuts in January based on weak employment and falling inflation, but four months later, job growth has rebounded and inflation has climbed past 3%, erasing the case for lower rates.

Heavy AI-related investment has driven up demand for chips, power, and construction materials, while strong equity markets have boosted spending and the Iran conflict has pushed up energy and commodity costs.

The Fed is likely to hold rates at 3.5%–3.75%, drop language suggesting a bias toward cuts, and release a dot plot showing most officials favor no cuts in 2026, with some projecting hikes.

Among policymakers, Christopher Waller now acknowledges hikes may be needed, Lisa Cook says she’d support tightening if inflation stays elevated, and Beth Hammack, Lorie Logan, and Neel Kashkari are already discussing the possibility openly.

Markets price in 61% odds of higher rates by year-end

Markets are leaning toward a rate hike by year-end, with traders assigning a 61% probability that rates will be higher in December than they are today, according to CME FedWatch data. A single 25-basis-point hike is the leading scenario at 43%.

Compared to a week ago, expectations have eased slightly but still point firmly toward tightening.

Why Warsh’s Fed strategy could matter more than interest rates

Bitcoin rebounded toward $67,000 earlier this week with nearly $700 million in large-holder accumulations over the past week, but according to Nicolai Sondergaard, research analyst at Nansen, traders are cautious about positioning for further upside.

Market sentiment is the starting point, as two prior ceasefire rallies this year, in April and after a truce broken by US strikes on June 9, both fully reversed, leaving traders treating the latest news with skepticism rather than confidence.

Sondergaard says the more relevant catalyst is this week’s Fed meeting, with the updated dot plot likely to shape liquidity conditions and institutional demand more than ceasefire headlines.

“A more hawkish outlook would likely keep liquidity conditions tight and weigh on institutional demand, while a softer path could support renewed inflows,” Sondergaard said in a note. “Lower oil prices resulting from a sustained Iran deal could help ease inflation pressures, but that is the transmission mechanism worth watching rather than the ceasefire headline itself.”

According to Bitunix analysts, the biggest issue for the markets is not whether rates move, but whether Warsh seeks to reduce the Fed’s reliance on forward guidance.

“If the Fed maintains elevated rates while allowing credit growth to continue, liquidity could remain supportive enough to sustain risk assets. But if policymakers eventually combine balance-sheet reduction with tighter credit conditions, the pressure on valuations could extend across technology stocks, AI-related investments, and digital assets alike,” analysts said in a note.