Translation: Baihua Blockchain

Yesterday, the Federal Open Market Committee decided to raise the federal funds rate target range by 25 basis points to 3.75%-4.00%. The voting result was unanimously approved, with Kevin Warsh showing no hesitation. This rate hike is the first since July 2023 and constitutes Warsh's first policy action as chair.

The dot plot shows that 16 out of 18 members expect another rate hike before the end of this year.

The cryptocurrency market did not interpret this rate hike itself as a signal; CME FedWatch data shows that before the decision was announced, the probability of a 25 basis point hike was priced in at about 92%.

Warsh's statements and his hawkish stance are the real signals.

“I find it hard to describe the broader financial environment as restrictive,” Warsh told reporters. “Therefore, we have reversed a measure of easing.”

In other words: The Federal Reserve believes the policy rate is still not high enough.

The pricing logic of cryptocurrencies is being rewritten

The market reacted swiftly. Interest rate swaps show that market participants currently expect the cumulative tightening to reach 75 basis points by mid-2027, which is more aggressive than the median forecast in the Fed's dot plot.

The yield curve further flattened, with the 2-year U.S. Treasury yield soaring to 4.74%, while the rise in long-term yields has been relatively slower, clearly signaling that the market expects Warsh to aggressively combat inflation, regardless of the costs of tightening financial regulations.

Bitcoin provides a clear analytical sample.

After the decision was announced, BTC fluctuated between $75,000 and $76,500, later stabilizing near $76,000.

Ethereum oscillated between $2,370 and $2,430, eventually closing below $2,400.

At first glance, this seems just a typical “buy the expectation, sell the news” bland response.

However, the underlying data reveals a more complex story.

The day before the announcement, the U.S. spot Bitcoin ETF saw a net outflow of about $450.3 million, marking the largest single-day net outflow since June 25.

The Ethereum trading platform ETF also faced a substantial outflow of $141 million on the same day.

From September 8 to 15, the cumulative net outflow for the Bitcoin ETF reached $753.2 million, nearly offsetting the approximately $770 million net inflow recorded from September 1 to 4.

Before the Fed's announcement, ETF capital flows had already reversed.

This indicates that the decline in cryptocurrency asset prices is primarily due to an advanced adjustment in macro expectations, rather than the rate hike itself.

As an asset class with long-duration risk characteristics, cryptocurrencies are inherently more sensitive to fluctuations in the discount rate compared to stocks.

In the two trading days before the FOMC meeting, Lewis Huang observed that Bitcoin's volatility was about four times that of the S&P 500 Index.

This time, Bitcoin's decline was relatively moderate because the impact of deleveraging had already peaked.

The Senate's failure to act on the Digital Asset Market Clarity Act, coupled with daily liquidation amounts exceeding $455 million, inevitably cast a shadow over market sentiment.

The 5% 10-Year U.S. Treasury: The Elephant in the Quietest Room

What cryptocurrency investors really need to focus on is not the federal funds rate, but the 10-year Treasury yield. Just a day before the announcement, the 10-year yield reached 5.04%—the highest level since 2007.

Since the military action taken by the U.S. against Iran in late February, influenced by rising oil prices and an expanding budget deficit, the global bond market has experienced a prolonged decline.

The Federal Reserve's recent 25 basis point hike is expected to have no impact on the underlying fundamental dynamics.

The Consumer Price Index (CPI) rose 3.4% year-on-year in August, and inflation remains a significant core concern.

Notably, gasoline prices skyrocketed by 27.4%, and energy commodity costs surged by 28%.

The scale of Treasury issuance is massive, the budget deficit continues to expand, and the Federal Reserve has ceased purchasing government bonds through quantitative easing.

The 10-year Treasury yield could remain high at around 5% for a long time, which is a harsh reality, but the consensus in the market regarding this is growing.

BMO Capital Markets strategist Vail Hartman believes that if the Federal Reserve maintains its existing stance this week, it will undermine its credibility in combating inflation.

Before the Fed's action, the market had already priced in the rise in long-term rates; the Fed's move merely confirmed this trend.

This has caused the opportunity cost benchmark for cryptocurrencies to continue climbing.

For an asset like Bitcoin, which does not produce cash flow, the valuation logic faces persistent challenges as the risk-free rate approaches 5%.

A recent survey by Bank of America revealed that one-third of fund managers listed “disorderly surges in bond yields” as the biggest tail risk in the market; their level of concern even exceeded that for an AI bubble and the second wave of inflation worries.

Geopolitics and Stubborn Inflation: A Dual Squeeze

Warsh made significant revisions to the policy statement, removing the reference that linked increased inflation to “supply shocks, especially in the energy sector”.

The market did not fully grasp the weight of this wording change.

This indicates that the Federal Reserve has changed its perspective on the nature of inflation, no longer viewing it purely as an external force that could quickly dissipate.

On the contrary, the Fed acknowledges that price pressures have become highly pervasive, and even if energy prices stabilize, inflation will persist.

Although the Fed delayed its previous forecast by a year, it still expects core PCE to remain at 2.5% by 2027 and that headline PCE will not reach the 2% target until 2029.

The cryptocurrency market faces profound structural shocks.

The Fed may not quickly pivot to easing after energy shocks subside, but rather take a stance favoring further tightening in the context of persistent stubborn inflation.

Huang from Bitget raised an important point: energy price pressures may fade before inflation does, meaning even if the first round of surging energy costs begins to subside, the Fed may still continue to tighten policy.

Meanwhile, the uncertainty in global geopolitics is exerting greater shocks on financial market conditions.

With inflation remaining high due to factors like Iran's restrictions on navigation through the Strait of Hormuz, Israel's threats to energy infrastructure, and oil prices maintaining above $100, the Federal Reserve's policy path has become increasingly opaque.

Along with the risk appetite retreat reflected in ETF capital flows, the volatility in the cryptocurrency world has intensified, further increasing the risk premium of assets.

Warsh’s "Declaration of Independence" and Political Risk

When asked about Trump, Warsh chose to refrain from comment. This silence is telling.

Faced with growing public pressure from Trump—who is not only calling for the U.S. to maintain the “world's lowest interest rates” but also threatening to interrupt trade with surplus countries before the Fed cuts rates—Warsh decisively fired the radical “first shot” of rate hikes.

This was both a response to inflation data and an action to establish his personal independent credibility.

BlackRock senior portfolio manager Jeffrey Rosenberg stated that the market views this meeting as a “key moment for Warsh to establish credibility,” further pointing out that this credibility consolidation has fortified Warsh's authority as the Federal Reserve's head.

However, this trend of increasing credibility is not necessarily positive for the crypto industry.

A hawkish central bank that earns market trust can anchor inflation expectations, but this also means that risk assets will have to confront elevated discount rates for a longer time.

Where is the new equilibrium for cryptocurrency?

Bitcoin has shown remarkable resilience at the $75,000 support level. However, on the other hand, stabilization does not equal reversal.

The assessment by Delta Exchange research analyst Riya Sehgal is noteworthy: the crypto market has “absorbed the early hawkish shock, but is currently in a stabilization phase after the events, rather than a clear bullish breakout.”

Assuming that the dollar and Treasury yields maintain the status quo, future directional signals will depend on whether Bitcoin and Ethereum can reclaim recent resistance levels.

From a technical analysis perspective, Bitcoin's first resistance range is between $76,500 and $78,000.

If this range can be effectively breached, it may open up further upward space. On the downside, $75,000 is the critical line; once breached, market focus will shift to the range of $71,300 to $72,000.

Compared to specific price points, what is more crucial is the flow of funds.

KuCoin pointed out in a recent market report: “The current issue lies not only in macro headwinds but also in the lack of incremental capital.” The report emphasized that on-chain data shows new capital inflows have stalled, and the supply of stablecoins remains flat.

Warsh's first policy statement sent a clear signal to the investment community: political pressures from the White House cannot bring back low-cost capital in the short term.

To welcome the prolonged high-interest-rate era, cryptocurrencies, which are extremely sensitive to liquidity, are entering a whole new phase.

New macro data forces the market to adjust valuation models reliant on low discount rates.

These models encompass future cash flow discounting for DeFi protocols, as well as Bitcoin's “digital gold” premium.

Throughout the remainder of 2026, three key dynamics are interwoven to shape the macro environment for cryptocurrencies: a Federal Reserve chair determined to assert independence, a bond market pricing in a 5% risk-free rate, and persistent inflation exceeding targets for five years.

Bitcoin's current relative stability around $76,000 may only be a temporary breather before the storm arrives.

Article link: https://www.hellobtc.com/kp/du/09/6445.html

Source: https://www.blockhead.co/2026/09/17/warshs-first-shot-how-the-feds-hike-is-repricing-crypto-markets/