Risk assets like crypto could face a liquidity crunch and short-term pressure as the chance of an interest rate hike has risen to 36 percent. The U.S. Federal Open Market Committee (FOMC) meeting on Wednesday coincides with a vital time where the ETH/BTC chart is about to break a major downward trend.
62 percent expect steady rates as 38 percent price in a potential Fed hike
On Wednesday, the 29th of July, the U.S. Federal Reserve will decide the interest rates, and risk assets will face the consequences of this decision. Market expectations indicate that there is almost a 38 percent chance of a rate hike, while the majority, 62 percent, expect the rates to be steady.
A Federal Reserve interest rate hike is generally considered bearish for cryptocurrencies because it tightens financial conditions and reduces liquidity across markets. Higher interest rates increase borrowing costs for consumers, businesses, and institutional investors, making speculative investments like cryptocurrencies less attractive. At the same time, safer assets such as U.S.
Investors could turn to T-bills and bonds if interest increases
Treasury bonds and money market funds offer higher yields, prompting some investors to shift capital away from risk assets, including Bitcoin and altcoins. A rate hike also tends to strengthen the U.S. dollar, which has historically placed additional pressure on crypto prices by reducing global demand for dollar-denominated assets.
Furthermore, higher financing costs discourage leveraged trading and institutional investment, leading to lower market liquidity and reduced buying pressure. However, the market’s reaction depends largely on whether the rate hike was already expected. If investors have already priced in the decision, the impact on crypto may be limited, with greater attention instead focused on the Federal Reserve’s outlook for future monetary policy.
ETH/BTC pair breakout will depend on Fed’s decision
In addition to that, the Fed’s decision will also predict how the ETH/BTC pair will behave, especially at a time when the pair has reached a critical point. According to analyst Michael van de Poppe, the ETH/BTC pair is about to break the 4-year downward trend, and the Fed’ decision could play a major role in whether ETH/BTC breaks above the trend or stays intact.
A dovish outcome, such as unchanged rates accompanied by signals of future rate cuts, could encourage investors to rotate capital into Ethereum and other altcoins, strengthening the ETH/BTC ratio. Conversely, a hawkish stance could drive investors toward safer assets or Bitcoin, delaying Ethereum’s breakout and keeping the long-term downtrend intact. A confirmed breakout would signal renewed relative strength for Ethereum and could mark the beginning of a broader altcoin outperformance against Bitcoin.
