Bitcoin traders brace for Fed hike, but a surprise hold could pose bigger risk

Bitcoin traders aren’t exactly panicking about Wednesday’s expected Federal Reserve rate hike, but they aren’t taking many chances either.

Markets are pricing a 92.5% chance the Fed raises rates for the first time in three years after strong employment data and stubborn inflation. Bitcoin has spent the past 24 days stuck between roughly $76,000 and $80,000, with volatility falling to a one-month low.

For some traders, the quarter-point hike is already old news.

“The bond market has done its job and fully priced in tomorrow’s hike,” said Chris Sullivan of Hyperion Decimus. In his view, the bigger shock could come if the Fed doesn’t hike, since that could leave investors wondering what policymakers see that markets don’t.

Crypto investors are still putting some money out of harm’s way.

Talos has seen a 28% net buying tilt toward stablecoins ahead of the meeting, according to research analyst Cooper Duschang. Around previous Federal Open Market Committee meetings, investors showed an average 8% selling tilt toward stablecoins.

Appetite for the two largest cryptocurrencies has moved in the other direction. Bitcoin buying conviction has dropped to 3% from 10%, while ether has fallen to 9% from 23%.