Will Bitcoin Crash if the Fed Hikes Rates in July?

All eyes are on the Federal Reserve as we approach the late July meeting. While recent inflation data showed a cooling trend, traders are trying to determine if the central bank will pause or push for another rate hike. Currently, CME FedWatch data suggests an 85 percent chance that policymakers will keep rates steady, leaving only a 15 percent probability for a 25 basis point increase.

Interest rate hikes typically act as a hurdle for Bitcoin and other risk assets. When borrowing costs rise, investors often shift their capital into lower risk options like Treasury securities, which reduces liquidity across the broader market. This dynamic was a major factor during the aggressive tightening cycle seen throughout 2022 and 2023.

The biggest risk for the current market is a surprise move. If the Fed decides to hike rates unexpectedly, it could trigger a sudden sell off across both crypto and stock markets. However, some analysts argue that if the economy remains resilient, Bitcoin could recover from any initial shock as long as institutional demand stays strong.

For now, the situation remains delicate. Even though most experts expect a pause, inflation is still sitting above the Fed target. Traders should watch for any hawkish comments from officials in the coming weeks, as these could signal a change in sentiment before the official announcement arrives.