Bank of America said this week that the Federal Reserve could raise interest rates by half a percentage point in December. The warning came after Tuesday's October inflation report ran hotter than expected for a third month in a row. In Bitcoin news, the coin trades at $73,888 on Binance, down 0.6% in 24 hours. It dropped to $72,727 on Tuesday after the report, its lowest price since August 20.
The bank still expects the Fed to raise rates by 0.25 percentage points, or 25 basis points (bps), at its December 8–9 meeting. But it says the case for a bigger move is growing, and it calls the Fed's decision to hold rates in October a possible policy mistake.
Traders are starting to listen. On Polymarket, the odds of a hike of 50 bps or more in December rose from 0.6% on Monday to 11.4% on Wednesday.
Bank of America Says the Fed Is Falling Behind on Inflation
The bank's call rests on three months of hot data. Consumer prices rose 0.4% in October, and core prices, which leave out food and energy because they swing the most, rose 0.3%. Both beat forecasts, the third upside surprise in a row in the Bureau of Labor Statistics report.
Bank of America now estimates that core PCE inflation, the Fed's preferred measure, is running at 3.3% a year. The Fed's target is 2%. The bank says price rises are spreading from goods to services, with electronics, airfares and hotels leading the increases.
Its base case is still a 25 bps hike in December. The change is in the risks: a 50 bps move is now possible, and the bank sees a growing chance of another hike in January instead of March.
The bank is not alone. Fed Governor Christopher Waller said in a speech on Tuesday morning that he leans toward a 25 bps hike in December. If core inflation came in around 0.3% again, he said, a 50 bps hike "should be considered." It did.
Higher rates make cash and bonds pay more. That tends to pull money out of risky assets like BTC, and a faster pace of hikes pulls harder.
Market Intelligence: Crypto Analyst Predicts Best New Crypto to Hodl
Bitcoin News From Past Hikes: Bigger Moves Hit BTC Harder
The size of the hike has mattered for BTC. We measured Bitcoin's price on Binance from the 2 p.m. ET announcement of each Fed rate hike since 2022 to one week later. That covers 12 hikes: six of 50 bps or more and six of 25 bps.
After the six big hikes, BTC was lower a week later five times. The median move was a 6% drop. The worst came after the 50 bps hike in May 2022, when BTC fell 23% in a week.
After the six 25 bps hikes, the picture was milder. BTC was lower a week later four times, but the median move was a drop of just 0.6%.
The record comes with a caveat. All six big hikes happened in 2022, a bear market that also saw the collapses of Terra in May and FTX in November. Those crashes made the falls after the May and November hikes worse.
The most recent hike was a 25 bps move on September 16. BTC rose 11.3% in the week after it, as the uncertainty that had built up before the meeting cleared. That makes the size of December's hike, more than the hike itself, the Bitcoin news to watch.
Bitcoin Price Analysis: Can BTC Hold $72,727?
BTC trades at $73,888, down 0.6% in 24 hours and 5.8% over the past week. It sits below both of its exponential moving averages (EMAs), averages that give recent prices more weight, on the daily chart. The 50-day EMA stands at $78,897 and the 200-day EMA at $76,449.
-
Resistance: $75,599, Monday's high, then $76,449, the 200-day EMA. Above that, $78,897, the 50-day EMA.
-
Support: $73,510, the November 8 low, then $72,727, Tuesday's low after the CPI report. Below that, $68,902, the August 20 low.
Resistance: $75,599, Monday's high, then $76,449, the 200-day EMA. Above that, $78,897, the 50-day EMA.
Support: $73,510, the November 8 low, then $72,727, Tuesday's low after the CPI report. Below that, $68,902, the August 20 low.
Outlook
Trigger
Level to watch
Rebound
A daily close above the 200-day EMA at $76,449
$78,897, the 50-day EMA
Holding pattern
BTC stays between $72,727 and $76,449
A range until the next Fed signal
Sell-off
A daily close below $72,727
$68,902, the August 20 low
For Bitcoin news, the next test is the Fed's own message. Traders already expect a 25 bps hike. If more officials join Waller and Bank of America in backing 50 bps, BTC may have to defend $72,727 before the December 9 decision.
Market Intelligence: Crypto Analyst Reveals Upcoming Binance Listings
Read original story Bank of America Warns of 50 bps Fed Hike in December: Is Bitcoin Heading for Another 2022-Style Drop? by Daniel Francis at Coinspeaker.com
