$67 Billion Giant Issues Surprise Fed Prediction: Sharp Bitcoin Sell-Off Imminent

The surprise interest rate hike expected by Citadel from the Fed risks further deepening the current downward trend in Bitcoin prices.

As markets focus on a “hold” decision ahead of the U.S. Federal Reserve’s (Fed) interest rate announcement today, a market-shaking statement has emerged from giant hedge fund Citadel. Managing approximately $67 billion in assets, Citadel predicts that the Fed could implement a surprise 25-basis-point rate hike today, raising borrowing costs to a range of 3.75% to 4%.

This contrarian view stands in stark contrast to the general market expectation of “no change.” For example, Kraken economist Thomas Perfumo states that the most likely outcome for the July meeting is for rates to remain steady. However, according to CME FedWatch data, the probability of a rate hike has risen from 25.7% to 35.8% in just one week. This increase indicates that the market is beginning to price in a potential surprise.

Forward Guidance and Pressure on Bitcoin

Frank Flight, head of strategy at Citadel, argues that this move would be a “cleansing event” that ends the era of forward guidance, through which the Fed previously informed the market in advance. According to Flight, a surprise hike would emphasize the Fed’s independence and force markets to focus on direct data rather than expectations. However, such a shockwave could drive up Treasury yields, creating a strong headwind for Bitcoin (BTC) and other risk assets.

Bitcoin price is already showing weak performance, retreating from last week’s $67,000 levels to below $64,000. Should Citadel’s scenario play out, it is believed that the crypto market’s cautious “wait-and-see” approach could give way to a sharp devaluation. Rising oil prices and geopolitical tensions increasing inflationary pressures are among the factors strengthening the possibility of the Fed taking such a radical step.