Bitcoin’s Friday Drop May Overstate Fed Rate Hike Odds, Data Shows

While speculation around a Federal Reserve rate hike has intensified following Friday’s strong jobs report, the actual market implied probability tells a different story. Traders currently assign a 58% chance that the Fed will raise its benchmark rate by a quarter point to a range of 3.75% to 4% at its September 16 meeting, according to the CME FedWatch Tool. That figure is largely unchanged from a week earlier, before the jobs data was released.

Reaction in Bitcoin and Bonds Looks Overdone

The muted shift in rate-hike odds stands in contrast to the sharp market reaction seen Friday. Bitcoin dropped from $81,300 to $78,700 within a couple of hours, while the two-year Treasury yield, which closely tracks interest rate expectations, climbed from 4.36% to 4.42%. Given that underlying rate expectations barely moved, the scale of that volatility appears exaggerated relative to what the data actually suggests.

September Hike Remains Uncertain

Current pricing largely reflects sentiment that formed after Fed Chair Kevin Warsh’s hawkish remarks at the Jackson Hole symposium in late August, rather than a fresh shift driven by the jobs numbers. Analysts note that a rate hike remains a possibility rather than a certainty, and could be taken off the table entirely if inflation data due September 11 comes in softer than expected. Some economists have also cautioned that raising rates amid an ongoing oil price shock could do more harm than good to the broader economy. The Fed’s decision is scheduled for September 16.