Analysts warn Fed rate hike could be a mistake as bitcoin, gold, and stocks fall
Bitcoin and the broader crypto market are under pressure as U.S. stocks and gold also fall, with rising oil prices fueling concerns about inflation and a potential interest rate hike by the Federal Reserve this month.
Some analysts argue that increasing rates now would be a mistake. They say higher oil prices, driven by supply disruptions from the Iran conflict rather than strong economic demand, act like a tax on households and businesses. Raising rates, they warn, could slow the economy further without addressing the root cause of inflation.
Why a rate hike may not help
James E. Thorne, chief market strategist at Wellington-Altus, called an oil price surge a “growth shock dressed up as inflation.” He said tightening monetary policy in response would be “policy error masquerading as prudence.” Mark Zandi, chief economist at Moody’s Analytics, agreed, stating that monetary policy should not react to supply shocks like oil price spikes.
Market odds and crypto impact
Despite these warnings, markets are pricing in a 68% chance of a Fed rate hike on September 16, according to the CME’s FedWatch tool. Until the decision is made, further oil price increases could keep pressure on risk assets, including crypto. Bitcoin has slipped below $77,000, while other major cryptocurrencies like Solana, ether, and XRP have also declined.
Technical indicators, such as the Ichimoku cloud, suggest a potential bearish trend reversal for bitcoin, as prices have moved below the cloud for the first time since mid-August.
What is confirmed
- Bitcoin, gold, and U.S. stocks are falling amid rising oil prices and concerns about a Fed rate hike.
- Oil prices have climbed to $90, driven by supply disruptions from the Iran conflict.
- Analysts argue that raising rates in response to an oil supply shock could harm economic growth.
- Markets currently price a 68% chance of a Fed rate hike on September 16.
- Bitcoin’s price has dropped below the Ichimoku cloud, a technical indicator suggesting a potential bearish trend.
Why this matters for investors
A Fed rate hike could tighten credit and slow economic activity, which may further pressure risk assets like crypto. However, some analysts believe the current market weakness could be short-lived if the Fed avoids raising rates.
