'Anything remotely dovish' from Fed could be good for bitcoin, says analyst

Markets are split on whether the Federal Reserve will hike rates or stay on hold on Wednesday, but analysts say bitcoin $BTC$63,880.93 may be less vulnerable than AI-driven tech stocks.

Bitcoin $BTC$63,880.93 recovered from its intra-day losses to trade flat just below $64,000 on Tuesday, while AI-linked technology stocks stumbled again ahead of one of the most uncertain Fed meetings in years.

Markets currently price a 70% probability that the Fed leaves rates unchanged on Wednesday and a 30% chance of a surprise 25-basis-point hike, CME FedWatch data shows. The split reflects Chair Kevin Warsh's reduced use of forward guidance, leaving investors with less clarity on the central bank's next move, according to derivatives analytics firm Block Scholes.

"Tomorrow's FOMC meeting, Kevin Warsh's second as chairman of the Fed, is one of the most uncertain in years," said Thahbib Rahman, research analyst at Block Scholes. Looking at every Fed meeting since 2015, he noted that only two have seen markets more divided over the outcome.

Signs of decoupling

Even with that uncertainty hanging over markets, bitcoin has largely held its ground in July while chipmakers and other AI favorites have come under pressure, raising the possibility that crypto is beginning to diverge, at least at the margin, from traditional risk assets.

“With the Nasdaq entering July on the back of strong momentum and increasingly stretched positioning, while $BTC continues to consolidate near multi-year lows, softer correlations are to be expected,” Vetle Lunde, head of research at K33 Research, wrote in a Tuesday report. “As a result, this week's FOMC meeting may have a more limited impact on $BTC than in previous periods of heightened policy uncertainty."

The divergence between stocks and bitcoin has become more pronounced this month, Block Scholes noted. Bitcoin is up about 6% for the month, while the S&P 500 has been little changed, and a basket of semiconductor stocks has now fallen nearly 20%.

Rahman said the market's expectations have whipsawed over the past month as softer inflation data competed with renewed geopolitical tensions, higher oil prices and tariff risks.

Even so, crypto sentiment has continued to improve, he said.

"Anything remotely dovish from Warsh could lead to $BTC's outperformance continuing," Rahman wrote.