The most aggressive rate-hike forecast on Wall Street this year threatens to extend headwinds for Bitcoin and risk assets.
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Bank of America forecasts 3 rate hikes in 2026, pressuring Bitcoin and crypto
Bank of America expects the Fed to raise rates three times in 2026, a hawkish shift threatening tighter conditions for Bitcoin and crypto. BofA Global Research now sees the federal funds rate rising 75 basis points across meetings in September, October and November, the bank said Monday.
"After the meeting, there is a much higher risk that the Fed will hike this year," Michael Widmer, commodity strategist at Bank of America, wrote Friday. The forecast aligns BofA with Wall Street's most aggressive rate calls and marks a sharp reversal from expectations that new Fed Chair Kevin Warsh would usher in a more dovish era.
The shift follows Warsh's first Federal Open Market Committee meeting, where the central bank held rates at 3.5% to 3.75% for the fourth consecutive time. Inflation at 4.2% in May — the highest since April 2023 — has kept the Fed on a hawkish path, with BofA seeing no cuts before the second half of 2027. Goldman Sachs echoed that timeline, cutting its gold price target to $4,900 an ounce from $5,400 and saying it expects no rate cuts before H2 2027.
Higher rates raise the opportunity cost of holding non-yielding assets like Bitcoin, historically correlating with reduced liquidity and downward pressure on crypto prices. BofA's commodity strategists said the shift from "inflationary cuts" to tighter monetary policy reduces gold upside by about 50 percent, a dynamic that extends to Bitcoin as a macro-sensitive asset. Deutsche Bank said gold could fall to $3,800 an ounce if the Fed delivers three to four rate hikes, while UBS warned that "downside risks to our views have increased materially."
Wall Street reprices risk across asset classes
The repricing of rate expectations has already begun reshaping Wall Street's outlook. BofA's gold strategists led by Widmer said the previous $6,000 target for gold now looks unlikely because the inflation backdrop remains "uncomfortable." Morgan Stanley commodity strategist Amy Gower said the bank's previous $5,200 gold forecast now appears "more challenging" given the hawkish Fed stance, particularly for ETF flows sensitive to real yields and the dollar.
For crypto markets, the transmission chain is direct: higher rates strengthen the dollar, push real yields higher and reduce appetite for risk-on assets. Bitcoin's correlation with macro liquidity conditions has been well-documented, with tightening cycles typically coinciding with drawdowns in crypto valuations. The CME FedWatch tool now reflects a significantly reduced probability of cuts through 2026, with BofA's forecast representing the most aggressive call among major Wall Street banks.
Warsh's hawkish hold at his debut FOMC meeting defied expectations that President Donald Trump's appointee would tilt dovish. Former Fed Chair Janet Yellen had previously criticized Trump's calls for lower rates as resembling "banana republic" behavior. The Fed's next policy decision is scheduled for September, when BofA expects the first of three quarter-point hikes.
This article is for informational purposes only and does not constitute investment advice.
[1] Bank of America Forecasts Three Fed Rate Hikes in 2026, Raising Concerns for Bitcoin and Crypto Markets[2] BofA just issued a shocking Fed interest rate roadmap for 2026[3] Is the Federal Reserve in safe hands? Here’s what to make of its first policy meeting under Warsh[4] Wall Street was once uber bullish on gold. Now it's changing its tune[5] In 6 Words, Fed Chair Kevin Warsh Just Dropped the Hammer on Wall Street
