The probability that the Fed’s next move will be a rate hike is increasing.
The market sharply revised expectations for US rates. The probability of a Fed rate hike by December rose to 68% after a strong jobs report showing 172,000 new jobs instead of the expected 85,000.
This is a bad set of signals for bitcoin. Investors were recently counting on policy easing, but now the market is again discussing not a cut, but a possible tightening. New Fed Chair Kevin Warsh faces his first major decision just three weeks after taking office.
The Labor Market Broke the Rate Cut Scenario
The May jobs report became the main turning point. The US economy created almost twice as many jobs as analysts expected. This result makes it harder to argue for a quick rate cut.
For the Fed, a strong labor market means the economy is still withstanding tight financial conditions. If employment remains stable, it is harder for the regulator to justify easing, especially if inflation does not return to the 2% target.
That is why the bond market quickly changed its assessment. The probability of a December rate hike rose to 68%. This means investors no longer see a rate cut as the base scenario for year-end.
New Fed Chair Faces a Tough Start
Warsh took office on May 22 and became the 17th Fed chair. For him, this is a return to the regulatory system: back in 2006, he became the youngest Fed governor in history, taking the post at age 35.
In his new role, he promised a “regime change.” Markets understood this as stricter inflation discipline and a review of the Fed’s balance sheet approach. But now the phrase has taken on a more practical meaning.
Ahead of the June meeting, the new leader faces a choice. He can leave the rate unchanged and show that he meant internal reform of the regulator. Or he can support a tougher signal and confirm that fighting inflation is once again a top priority.
The Senate Has Already Shown the Level of Conflict
Warsh’s appointment looked politically complicated from the start. The Senate confirmed him by a vote of 54 to 45. This was the most contentious Fed chair vote in history.
Wall Street initially saw his arrival as a sign of continuity. Although during the 2008 crisis he was considered a hawk alongside Ben Bernanke, analysts expected he would now be closer to Jerome Powell’s approach.
Now that assessment is being tested. If the regulator keeps the rate and softens its rhetoric, the market will see a continuation of the previous line. If the tone becomes tougher, investors will begin to see the new chair as a factor for more expensive money.
Hawkish Signals Intensify Inside the Fed
Additional attention was drawn by comments from Cleveland Fed President Beth Hammack. She said the regulator may soon need to act to bring inflation back to the 2% target.
Her logic is simple. If you wait for final confirmation that inflation is entrenched, larger and more painful steps may be needed later. For the market, this sounded like an argument for earlier tightening.
As a result, Warsh is caught between two expectations. The White House may still be hoping for a rate cut, while part of the market and some Fed officials are already looking toward a hike. This makes the June 17–18 meeting a key event for all risk assets.
Bitcoin Reacts to the Rate More Than to Rhetoric
For the crypto market, the Fed chair’s personal attitude toward digital assets matters less than the rate trajectory. Warsh is considered the most crypto-savvy chair in the regulator’s history. He has had ties to bitcoin and stablecoin projects, opposed a Fed digital dollar, and supported private stablecoins.
However, the market is not looking at his biography, but at the cost of money. If yields rise and expectations of a rate cut disappear, it becomes harder for bitcoin to maintain demand. This is especially noticeable during ETF outflows and declining risk appetite.
Since mid-May, BTC has fallen from about $82,000 to the lower end of the $60,000 range. This move almost coincided with the collapse of rate cut expectations. For investors, the link looks direct: the less chance of easy policy, the harder it is for the crypto market.
ETF Outflows Heighten Anxiety
Amid rate concerns, bitcoin ETFs have seen a prolonged series of outflows. This was an additional signal that institutional investors are reassessing their positions.
When the market expects a rate cut, such products usually get support. Cheap money increases interest in highly volatile assets. When the scenario shifts toward a pause or hike, some capital moves to more conservative instruments.
That is why not only the new Fed chair’s words matter for BTC. The signal at the meeting itself is important. If the regulator leaves the door open for a hike, the market may continue to reduce risk. If the tone is softer, bitcoin will have a chance to recover.
AI and Energy Add a New Layer of Risk
It is not just the labor market that complicates the situation. Rate expectations are also affected by rising energy prices due to the Middle East conflict and new demand from AI infrastructure development.
If energy becomes more expensive, inflation risks increase. If the AI sector continues to create demand for capacity, equipment, and capital, the economy gets an additional source of activity. For the Fed, this means the slowdown may be weaker than rate cut advocates expected.
That is why the case for imminent policy easing has become less convincing. The market sees an economy that does not yet look weak enough for a Fed reversal. This is what is putting pressure on bitcoin.
The June Meeting Becomes the Main Event for BTC
Now investors’ attention is focused on the June 17–18 meeting. The market will assess not only the rate decision itself, but also the Fed’s language.
If the regulator keeps the rate and signals that a hike is not the base scenario, bitcoin may regain some losses. But if Warsh confirms a hawkish approach and allows for further tightening, pressure on the crypto market will remain.
For BTC, this is a moment where every word matters. The new Fed chair understands digital assets better than his predecessors, but that only makes his decision more important. He knows how the market will react to a rate signal.
What Comes Next?
Bitcoin has entered a period where its direction depends not only on on-chain data and ETF flows, but also on Fed policy. The probability of a rate hike by December has already reached 68%, and a strong labor market has made a cut less likely.
Warsh got his first major test almost immediately after his appointment. If he maintains Powell’s caution, the market may get a breather. If he confirms the promised “regime change,” investors will continue to price in more expensive money and further reduce risk.
The main takeaway is simple. For bitcoin, the danger now is not the new Fed chair himself, but the disappearance of hope for quick rate cuts. As long as the market sees strong employment, inflation risk, and hawkish signals inside the regulator, BTC remains dependent on the June 17–18 decision.
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