Fed Governor Christopher Waller said he would support a rate hike in December. He spoke at a Bank of England conference in London. Within a few hours, market odds for a December hike rose from 76.3% to 96.3%.
The Fed rate is the price of money in the US. When it is raised, the dollar strengthens and money flows out of risky assets. Bitcoin reacted immediately: down 1.3% to $74,080.
It wasn't just crypto that fell. Gold, US stock futures and oil moved down along with it. The next point of movement is today's inflation data.
What did Waller say?
Two phrases from the speech rewrote market expectations:
- On December. "I would still support a 25 basis point rate hike at our December meeting."
- On inflation. "The inflation data was bad. No bright spot."
The backdrop for such words was provided by September's statistics. PCE rose 0.5% for the month and 3.7% for the year. PCE is the price index the Fed considers its main one.
How did the markets react?
The sell-off was broad-based. Here is how the day's numbers closed:
- Bitcoin - down 1.3% to $74,080 on Bitstamp.
- ETH - $2,088 (-1.1%), SOL - $84.42 (-1.9%), XRP - $1.08.
- The CoinDesk 20 Index lost 1.2% since midnight.
- Gold fell just over 1% and is trading below $4,100 per ounce.
- Nasdaq 100 futures - down 0.4%.
- The pound reversed from positive to negative to 1.3430, the DXY dollar index holds below 102.
- WTI oil slipped 2% to $84, the lowest since late August after a signal of a pause in strikes on Iran.
Why does this weigh on crypto?
An expensive dollar takes money away from risky assets. A rate hike makes the dollar more expensive. Assets without coupons and dividends become less attractive.
- Expectations have solidified. According to CME's FedWatch tool, the market is pricing in +25 basis points on December 9. FedWatch calculates the probabilities of Fed decisions based on futures.
- The range will rise. After such a move, the rate will be in the 4.00-4.25% corridor.
What does this mean for a trader?
US October CPI comes out today at 16:30 Moscow time. This is the nearest trigger for a new surge across all markets.
- Monthly forecast - +0.3% versus 0.6% in September.
- Core reading - +0.2%.
- There will be no annual figures. Due to the government shutdown in 2025, October data from last year was not collected.
Key point: Waller warned that a much higher figure could require a 50 basis point move. The December meeting and the statistics release are in the economic calendar.
Did you watch BTC get dumped on a single phrase?
One sentence from a Fed official - and the entire crypto market slides down a percent-plus within hours. Such a move can be traded, the question is the notional. On a two-thousand-dollar account, a perfect short from $75,000 to $74,000 brings in the cost of food delivery. In prop trading, the trading notional is provided by the company: you pay for the selection, trade within its loss limits and share the profit under the contract. There is almost a month until the December 9 meeting - you'll have time to figure out how this scheme works.