Warsh's Fed Debut Hands Crypto the Dot, the Hike, and the Finger 🪙

The Federal Reserve held its benchmark federal funds rate steady at 3.50%–3.75% on June 17, the fourth consecutive pause this year and the first policy decision under newly confirmed Chair Kevin Warsh, who took over from Jerome Powell after Senate confirmation. The FOMC vote was unanimous. Markets had priced a 97% probability of a hold, according to the CME FedWatch tool, so the rate decision itself carried no surprise. The shock arrived in the projections that followed. The updated Summary of Economic Projections lifted the median year-end 2026 federal funds rate to 3.8% from 3.4% in March, and showed that half of the FOMC participants now favor at least one rate hike in 2026, removing the last remaining dot for a cut that had appeared in prior 2026 meetings. The median 2027 projection rose to 3.6% from 3.1%, and the 2028 projection increased to 3.4% from 3.1%. Warsh himself declined to submit a dot, the first Fed chair in 14 years to opt out of the SEP. The Fed also raised its inflation forecasts, with median 2026 PCE inflation revised to 3.6% from 2.7% and core PCE inflation to 3.3% from 2.7%, while the median 2026 unemployment projection improved to 4.3% from 4.4% and GDP growth was trimmed to 2.2% from 2.4%.

In his debut press conference, Warsh stressed the Committee's commitment to its 2% inflation target and signaled a leaner communication style, telling markets that "The Committee will deliver price stability." The FOMC statement acknowledged that economic activity is "expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East," citing supply shocks in sectors including energy tied to the U.S.–Israeli conflict with Iran. The statement dropped prior language suggesting a bias toward future rate cuts, in line with forecasts from Bank of America and Goldman Sachs economists. A Reuters poll of 102 economists had found that 72 expect rates unchanged through the end of 2026, with consumer inflation estimated at 4.2% year-over-year last month and the PCE Price Index at 3.8% in April.

Rate-hike odds repriced sharply. Per the CME FedWatch tool, futures traders now price roughly a 66% chance of at least one hike before year-end, with September odds of a hike rising to about 70% (including a 20% chance of a double hike) and December odds of at least one hike at 88%. The 2-year Treasury yield jumped more than 16 basis points to 4.22%, the 10-year benchmark sat near 4.47%, and the 30-year approached 4.97%. The Dow fell 507 points after hitting a record intraday. On Polymarket, traders priced an 80% chance that there are zero rate cuts in 2026, and expectations for any 2026 cut collapsed to zero.

Crypto markets sold off on the hawkish tilt. Bitcoin (BTC) dropped about 5% to trade near $62,499, with an intraday low around $64,000 reported by multiple outlets, while Ethereum (ETH) fell roughly 2% to $1,682 and was last down over 6% on the week. Solana (SOL) eased to around $72, XRP slipped 2.5% to $1.17, and Hyperliquid (HYPE) lost 3% before recovering to $71. Roughly $450 million in positions were liquidated across the market in the 24 hours following the decision, and Strategy's MSTR fell 5% with STRC marking a new low at $89. On prediction markets, odds of BTC dropping to $55,000 climbed to nearly 72%, while predictors placed 83% odds that ETH will revisit $1,500 before reaching $3,000, with ETH trading about 12% above the $1,500 level. Matt Mena, senior crypto research strategist at 21Shares, said the pause was "fully expected" and that BTC is "structurally well-positioned" to revisit the $100,000 level in Q3 after near-term consolidation, with $70,000 cited as the next resistance and $62,000–$60,000 flagged as key support. Analysts at Bitfire Research described current levels as a "high-value entry window" for BTC. Coinbase, separately, held a Tuesday event previewing tokenized equities trading and options products for crypto and stocks, with Benchmark-StoneX's Mark Palmer reiterating a $270 price target on COIN.