The Bitcoin market is abuzz with anticipation as the Federal Reserve's September monetary policy meeting approaches, with Goldman Sachs weighing in on the likelihood of a rate hike. The bank's Chief Economist, Jan Hatzius, has declared a September rate hike 'very unlikely' due to underwhelming employment figures, cooling inflation, and weaker retail sales. This sentiment is echoed by the CME FedWatch tool, which now predicts a 69.4% chance of a rate hold at 3.50%-3.75% and a 30.6% chance of a quarter-point hike. These odds suggest that the market is dialing back its bets on a September hike, with a rate cut in December becoming a more plausible outcome.
The relationship between the Fed's monetary policy and Bitcoin's price movement is complex and not always straightforward. A study by economists Gianluca Benigno and Carlo Rosa for the Federal Reserve Bank of New York found that Bitcoin's price was 'orthogonal to monetary and macroeconomic news,' with no statistically significant reaction to surprise changes in the Fed funds goal. However, the consumer price index (CPI) has been a notable influence on Bitcoin's price, with a 170% return during the Fed's 2019 rate-hike pause. This pattern raises an intriguing question: what will happen to Bitcoin if the Fed decides to hold rates in September?
Historically, Bitcoin has not reacted significantly to rate holds, but it has shown a more pronounced response to rate cuts. After the July 2019 rate cut, Bitcoin climbed 19% in the following week but then fell flat two weeks later and lost a third of its value in the second half of that year. This suggests that Bitcoin's price may be more sensitive to the market's interpretation of the Fed's decisions rather than the decisions themselves. If the Fed holds rates in September, it could be seen as a volatility event, with the market's reaction focusing on the potential for ultimate cuts.
The 2025 rate hold under then-Fed Chair Jerome Powell provides a unique case study. The Fed held rates at 4.25%-4.50% for five straight meetings before cutting in September 2025, and Bitcoin ended the month modestly higher. However, the 2025 rate hold was also marked by a tariff-driven slump towards $75,000 in April, followed by Bitcoin's all-time high above $126,000 in October. This suggests that the impact of rate holds on Bitcoin's price can be multifaceted and influenced by other economic factors.
In recent months, Bitcoin has faced a challenging environment, with price declines following eight of the last nine Fed decisions, an average drop of around 11% in the week after each hold. This trend has left Bitcoin near $63,000, almost half of its October 2025 peak. The market's current sentiment is bearish, with retail traders looking to the September meeting as a potential catalyst for further price movements. As the Fed's decision approaches, the Bitcoin community awaits with bated breath, hoping for a positive outcome that could boost prices and restore confidence in the cryptocurrency market.
