On Sep. 16, the Federal Reserve raised its benchmark interest rate by a quarter percentage point to the 3.75%-4% range. It was the central bank's first rate increase since 2023. While the lat
On Sep. 16, the Federal Reserve raised its benchmark interest rate by a quarter percentage point to the 3.75%-4% range. It was the central bank's first rate increase since 2023.
While the latest hike didn't have any demonstrable impact on Bitcoin's price action, the Fed's dot plot is a warning sign for the leading cryptocurrency.
Related: Kevin O'Leary has a warning on Washington's tax plans
The dot plot shows the individual projections of the Federal Open Market Committee (FOMC) participants for the future federal funds rate.
There are up to 19 participants contributing projections: the 7 members of the Federal Reserve Board of Governors and the 12 presidents of the Federal Reserve Banks. Each dot represents one participant's projection of the appropriate federal funds rate for a particular period in the future.
FOMC participants’ assessments of appropriate monetary policy: Midpoint of target range or target level for the federal funds rate, Source: Federal Reserve
The latest dot plot released yesterday shows one missing dot as Chair Kevin Warsh refused to provide a long-term prediction on interest rates.
Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents, under their individual assumptions of projected appropriate monetary policy, September 2026, Source: Federal Reserve
However, it reveals that the FOMC participants are eyeing the interest rate to hit a median 4.1% by the end of 2026 and through 2027.
As the current rate range is 3.75%-4%, the projected median target of 4.1% means another rate hike of at least 0.25% is expected before the end of this year.
If the Fed expects to raise interest rates again this year as the dot plot suggests, it points to a tougher path ahead for Bitcoin.
Higher interest rates make government debt instruments like the U.S. Treasury bonds more attractive to investors because of higher yields.
Higher rates also translate into more expensive lending, which shrinks liquidity in the markets. In such a situation, highly volatile assets like Bitcoin suffer in particular because investors trust their funds with yield-bearing assets like government bonds.
However, the Fed's policy on interest rates is only one of the factors that influences Bitcoin's price action.
Macroeconomic factors like inflation, wealth concentration, geopolitical conflicts, etc., along with the progress or lack thereof when it comes to key crypto issues like the CLARITY Act, also influence Bitcoin's price.
Bitcoin was trading at $76,604 at the time of writing, as per Decibel.
Related: Wells Fargo sees 50% upside for Amazon-linked stock
