Bitcoin faces heavy pressure from rate hikes as it is expected to reverse 200 basis points

According to Woofun AI, drastic restructuring of the macro interest rate path is forcing Bitcoin to reprice. The market benchmark situation has completely reversed from four interest rate cuts nine months ago to four interest rate hikes before mid-2027. This fundamental reversal caused interest rate variables to replace liquidity expectations and became the core contradiction that dominates short-term asset prices. Bitcoin's fluctuation around $80,000 is essentially a stressful reaction of the market to the Federal Reserve's policy shift.

The complexity of the multi-party game pattern far exceeds that of a single policy dimension. Treasury Secretary Scott Bessent recently issued a stern warning, and billionaire Stanley Drucken Miller, who is close to current Federal Reserve Chairman Kevin Walsh, has been reported to indicate that interest rate cuts are “no longer necessary.” Drucken Miller is the co-mentor of Walsh and Bezent, and his remarks are viewed as a barometer of the direction of the core circle of Washington's monetary policy. This week, at a private gathering of Wall Street executives, he said bluntly that the opinion within the Federal Reserve that federal funds interest rates are too tight is “simply ridiculous,” and emphasized that judgments should be based on common sense that global asset prices are high.

This statement not only refutes the logic of cutting interest rates on the grounds that “interest rates are too tight,” but also suggests a significant increase in the political sensitivity of the Federal Reserve Chairman's position — although he still calls Walsh “one of his closest friends,” he is no longer allowed to communicate privately. Meanwhile, Trump continues to pressure the Federal Reserve to cut interest rates. This is a tripartite struggle with the goal of stabilizing long-term yields in the bond market and controlling inflation by the Federal Reserve. Drucken Miller previously signed a joint comment in the “Wall Street Journal” criticizing Walsh's attempt to manipulate and reduce long-term treasury bond yields, believing that this move would drive up inflation expectations and asset bubbles. Bitcoin is sandwiched between the White House's demand for interest rate cuts, stable demand in the bond market, and the Federal Reserve's austerity tendencies. It not only benefits from potential liquidity release, but is also extremely afraid of the withdrawal of liquidity caused by interest rate hikes. The current market pricing direction is contrary to the president's demands, reflecting the deep-seated concerns of old-school macro traders that unconventional measures to suppress long-term interest rates could trigger an asset bubble.

The inside of the Federal Reserve is not one-size-fits-all, but the market is no longer waiting for the dovish members to hesitate. Federal Open Market Committee (FOMC) members Anna Powell, Michael Barr, and Lisa Cook are currently partial, but Barr has reserved space, saying that if the data shows that inflation has not cooled down, he can accept interest rate hikes.

This “waiting for data” stance may quickly shift once strong data is met. According to data compiled by Woofun AI, the CME (CME) (CME.US) Federal Reserve Watch Tool shows that traders think the probability that the Fed will raise interest rates next week is close to 90%.

This high-probability pricing means that the focus of short-term transactions has moved from “whether to cut interest rates” to “the extent of interest rate hikes, the toughness of the bitmap, and the hawkish tone of post-meeting speeches.” The market is unwilling to keep fantasies for dovish anymore, but is directly betting on the reality of policy tightening.

Inflation and oil prices form substantial constraints, and critical technical points are being tested. Bitget Wallet research analysts pointed out that the August Consumer Price Index (CPI) was mixed and did not provide clear dovish signals, but instead strengthened the reason for the 25 basis point rate hike on September 16. She proposed that Bitcoin's continued rebound must meet three conditions: stable yield on treasury bonds, stable oil prices, and continuous net inflow of spot ETFs. Without any of the three, the rebound would only be an unbundled recovery. Currently, the war between the US and Iran is still ongoing, and oil prices have once again reached 100 US dollars per barrel. High oil prices make it difficult to reduce inflation expectations, and the space for the Federal Reserve to “relax the currency first” has narrowed further.

Analyst Kobeissi Letter emphasized on X that the current expected shift is extraordinary: the market benchmark situation is to raise interest rates four times by July 2027, while interest rates were cut four times in the same period at the beginning of 2026, and interest rate expectations fluctuated 200 basis points within nine months. This is the most hawkish policy expectation since the Federal Reserve began the current rate hike cycle in March 2022. The market believes that with a “higher and longer” return, inflation will not subside easily. On the technical side, analysts placed near-end support in the $75,000-76,000 range, and viewed $80,000 as the first major test above. Bitcoin's rise in the past month was mainly due to the recovery of the overrun decline in the previous period and the liquidity imagination brought about by the Ministry of Finance's transaction. After hopes of interest rate cuts were extinguished, the sustainability of this round of increases depends on whether the results of this week's interest rate discussions and the growth, inflation, and unemployment rate forecasts in the Economic Forecast Summary (SEP) were revised simultaneously.

Trading logic deductions show that Bitcoin is facing a severe revaluation. Tokyo Bitbank analyst Hiroshi Hasegawa also pointed out that Bitcoin may continue to be under pressure at the top, and the market awaits the FOMC decision. If the Federal Reserve raises interest rates or the SEP shows that more members support raising interest rates during the year, short-term yields will rise and the yield curve flatten further, which will put additional pressure on Bitcoin. The near end needs to pay attention to the lower end of the recent range of $75,500. Once it effectively falls below, the increase accumulated in August may continue to return, and the next psychological barrier will fall to $70,000.

The lower the interest rate, the higher the opportunity cost of holding cash, and the more capital flows to risky assets such as Bitcoin; the higher and higher the interest rate, the attractiveness of cash and short-term bonds has rebounded, and risky assets must withstand higher discount rates. Bitcoin's rise over the past month did not escape this logic; it only happened before the expected reversal was completed. Next, the statement and bitmap will define whether this action is a “one-time action to prevent inflation” or the first “higher and longer restart”. If it were the former, Bitcoin might see $75,000 to $76,000 as the lower end of the shock; in the latter case, the market would trade around $70,000 and reassess the residual value of the August rebound. This is the toughest stress test for crypto assets from the macro narrative since March 2022.