Citadel bets on a Fed rate hike Wednesday as bitcoin analysts call a hold. Someone will be wrong.
Citadel Securities is predicting a surprise 25-basis-point interest rate hike by the Federal Reserve, contradicting the market consensus of no change. The firm argues that a hike would establish central bank independence and end the era of predictable forward guidance.
Why it matters
A surprise rate hike would likely trigger volatility in Treasury yields and create significant headwinds for risk assets like bitcoin.
Citadel, one of the largest hedge funds in the U.S., managing $67 billion in assets, is calling for markets to brace for a 25-basis-point interest rate hike from Chair Kevin Warsh, not in September but later on Wednesday. That would lift the Fed's benchmark borrowing cost to the 3.75%-4% range.
Meanwhile, both crypto and traditional market analysts expect no change. Crypto exchange Kraken's economist Thomas Perfumo put it best: "The most likely outcome of July's FOMC meeting is no change in interest rates."
That tension is why a surprise rate hike Wednesday could send already buoyant Treasury yields higher, creating a headwind for risk assets, including bitcoin and the wider crypto market.
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