Citadel Securities thinks the Federal Reserve is about to do something most of Wall Street isn’t expecting. The firm’s macro strategist Frank Flight has projected that the Fed will raise interest rates by 25 basis points when the FOMC wraps its meeting on July 30, pushing the federal funds rate from its current 3.5% to 3.75% range up to 3.75% to 4%.

If that sounds like a contrarian call, it is. A Reuters poll of economists found that most expect the Fed to hold rates steady, right where they’ve been since early 2026. CME FedWatch data as of July 13 pegged the probability of a hike at roughly 46.5%, meaning the market is close to a coin flip but still leaning toward no change.

Why Citadel thinks Warsh pulls the trigger

The logic behind Citadel’s call centers on Fed Chairman Kevin Warsh and what Flight describes as an effort to reinforce Warsh’s credibility on inflation. Think of it as a trust exercise, except instead of falling backward into someone’s arms, Warsh would be hiking rates into an economy that many participants believe doesn’t need the extra tightening.

Warsh has reportedly been looking to reduce the Fed’s reliance on forward guidance, that practice of telegraphing rate decisions months in advance so markets can price them in before anything actually happens. A surprise hike would signal that the Fed under Warsh is willing to act on data rather than market expectations, even if it means catching traders flat-footed.

What this means for crypto and risk assets

Rate hikes and risk assets have a well-documented relationship, and it’s not a friendly one. Higher rates increase borrowing costs across the economy, making leveraged positions more expensive to maintain and pushing capital toward safer, yield-bearing instruments like Treasuries and money market funds.

The roughly 46.5% probability on CME FedWatch tells you the market hasn’t dismissed the possibility of a hike, but it hasn’t embraced it either. If the Fed holds, markets likely shrug and move on. If the Fed hikes, the gap between expectation and reality creates a repricing event that could send shockwaves through every asset class.

For crypto investors specifically, the key variables to monitor are straightforward. Watch the dollar index, which typically strengthens on rate hikes and creates headwinds for Bitcoin. Watch Treasury yields, particularly the 2-year, which reflects near-term rate expectations. And watch funding rates across major crypto exchanges, which will reveal whether leveraged long positions start unwinding in anticipation.