Prediction market traders see little chance of Bitcoin or Ethereum reaching higher price targets after the Federal Reserve flagged a possible rate hike.
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Bitcoin traders turn bearish as Fed holds rates at 3.75%
Prediction market traders see little chance of Bitcoin or Ethereum reaching higher price targets after the Federal Reserve flagged a possible rate hike.
Bitcoin and Ethereum traders priced out near-term upside after the Federal Reserve held rates at 3.5%-3.75% and flagged a possible hike. The Federal Open Market Committee voted unanimously June 17, while the Summary of Economic Projections removed a prior outlook for a rate cut and indicated a hike is possible, with the median estimate for end-2026 rising to 3.8%. The decision pushed traders on prediction markets to lower their expectations for Bitcoin and Ethereum price targets, according to data from prediction platforms cited by Decrypt.
"The commitment to deliver is strong, unanimous, and unambiguous," Fed Chair Kevin Warsh said at a news conference, referring to the central bank's pledge to bring inflation back to its 2% target. Warsh, who declined to submit his own rate forecast, said he is forming task forces to review the Fed's communication, balance sheet and inflation framework, with recommendations expected before the end of 2026.
The Fed's updated projections showed inflation running at 3.6% on headline and 3.3% on core for 2026, up from 2.7% for both measures in March. The consumer price index rose 4.2% in May from a year earlier, marking another multiyear high. Stocks sold off after the decision, with the S&P 500 falling 1.2% and the Nasdaq dropping 1.3%, while the 10-year Treasury yield rose to about 4.498%. The VIX volatility index spiked 13% as markets digested the hawkish outcome of Warsh's first meeting as chair.
For crypto markets, the shift in the rate outlook removes a key driver that traders had been betting on. Lower rates tend to boost risk assets including cryptocurrencies by reducing the opportunity cost of holding non-yielding assets. With the Fed now indicating a possible hike as soon as October, according to CME Group's FedWatch gauge, the macro tailwind that some traders had anticipated has been replaced by a headwind. Spot Bitcoin ETFs, which had drawn net inflows in recent weeks on expectations of a dovish Fed, could face renewed outflows if the rate hike timeline firms up. Ethereum's path to higher price targets depends on a reversal in rate expectations that the Fed has now explicitly ruled out for 2026.
The bearish turn in prediction markets reflects a broader repricing of risk across asset classes. Traders who had expected rate cuts as a trigger for crypto gains now face a Fed that is prioritizing price stability above all else. Warsh's task forces, which will examine the Fed's approach to productivity and jobs "in an era of transformation," could introduce further uncertainty about the central bank's reaction function, making it harder for crypto traders to model the macro environment. The Fed's longer-run funds rate estimate of 3.1% suggests that even after inflation is contained, rates will settle above the near-zero levels that fueled crypto's bull runs in prior cycles.
This article is for informational purposes only and does not constitute investment advice.
[1] Bitcoin, Ethereum Traders Grow Even More Bearish as Prices Fall After Fed Decision[2] Fed holds rates steady, pares down statement to remove cutting bias[3] Fed's Warsh era starts with rates unchanged, price stability promised[4] Warsh kicks off Fed chief era with sweeping review as rates remain unchanged[5] The Fed maintains rates: What it means for your money
