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Topics covered:

• An Uncertain Fed Sees Rate Cuts Priced Out for 2026.
• Risk Assets Trade Negatively Following the Fed Meeting.
• Bitcoin Shows Resiliency, but is the Rally Over?
• Cryptonary's Take.

An Uncertain Fed Sees Rate Cuts Priced Out for 2026

This Wednesday (18th March), the Fed met and kept interest rates unchanged at 3.50%-3.75%.

The initial statement read dovishly with inflation forecasts revised higher for 2026 from 2.4% to 2.7%, and growth also revised higher by 0.1% for 2026, and 0.3% for 2027. Despite this, the Fed maintained their projection for one rate cut in 2026, with another coming in 2027. On this statement, the market assumed that the Fed would look through a likely near-term spike in inflation driven by higher oil prices, and therefore the initial reaction in risk assets was to move higher.

However, once the press conference started, Powell mentioned that he and the Fed were very 'uncertain' and that they 'just don't know' with regards to the conflict in the Middle East, i.e., how long it'll go on for, the magnitude of upside risk to oil and energy prices, and therefore the magnitude of the likely inflationary impact. Powell also noted that if the committee had chosen a meeting where they didn't have to provide projections and a dot plot, that would have been it. This essentially told the market that they shouldn't pay too much attention to the Fed's projections and their dot plot. This led market participants to price out rate cuts for 2026, with the next rate cut now priced for July 2027, and risk assets sold off on this.

Other hawkish elements of the Fed meeting were that the only dissent was from Miran, meaning Governor Waller did not dissent. The only way to interpret this is that despite Waller's previous worries of a weakening labour market, he is seeing the upcoming inflation spike as the bigger risk. This is despite the most recent labour market report being rather negative.

Alongside this, Powell was asked in the press conference whether he'd stay on as Chair should the investigation not be concluded. He said that he would. This led markets to price in Powell staying in his seat for longer than planned, which is bearish for risk assets. This is Powell putting pressure on the Trump administration to drop the investigation so that Powell can then stand down and Trump gets his nominee in (Warsh).

Markets are now pricing the following - by the end of this year (2026):

• 74.1% chance of rates remaining unchanged.
• 19.5% chance of 1 rate cut.
• 1.5% chance of 2 rate cuts.
• 4.8% chance of 1 rate hike.

Target Rate Probabilities for Fed Meeting 9th December 2026

This is a drastic change from just several weeks ago, with the possibility of rate hikes now being introduced. Powell also mentioned that there was a discussion amongst Fed members for a '2-sided discussion', i.e., the introduction of potential cuts. However, Powell said that energy supply shocks should be looked through and therefore the market took this as that their bias is still for cuts.

In our view, we don't see hikes as even remotely likely, particularly whilst inflation expectations remain anchored, which they are. If anything, our view is that higher oil and energy prices are going to see inflation move higher in the short-term, which will keep the Fed on hold for longer. But, our view is that this will have a negative impact on growth and lead to consecutive rate cuts that start in the back-end of 2026.

Polymarket currently has the odds of no cuts for 2026 at 31%, with 1 cut at 23%, and 2 cuts at 18%.

Polymarket Odds for 'How Many Fed Rate Cuts in 2026'

With 2 rate cuts currently priced at 18% on Polymarket, it's a relatively attractive bet, particularly if this falls to the 15% mark - this is a bet I will personally (Tom) take but with small size as it is still a 'punt', and especially if price falls to the 15% level.

Risk Assets Trade Negatively Following the Fed Meeting

Following the Fed Meeting, all major US equity indexes have traded lower, with the S&P now trading close to its range lows and having gone nowhere for the last 6 months.

S&P500 Trading Close to Range Lows

Alongside this, the Dollar (the DXY - the Dollar Index) has traded into the 100 level whilst Gold has pulled back 6.26% since Wednesday, and 13.46% since early-March. The US2Y Bond Yield has also broken out of its range highs - something we've been watching for several weeks now as a 'risk-off' signal.

US2Y Yield 1D Chart

This is a major move for the US2Y.

All of the above suggest a few things:

• The market is pricing in greater inflation in the short and medium term.
• Bond Yields are pricing in increased issuance (to pay for the war).
• A general tightening in financial conditions.

All of this only adds to an unsupportive backdrop for risk assets.

However, in recent weeks, Bitcoin's price action has been relatively constructive. Let's dive into it.

Bitcoin Shows Resiliency, but is the Rally Over?

In the last fortnight, Bitcoin has broken out to the upside with price tagging the $76k level but having pulled back meaningfully from there in recent days.

The initial push higher in price was driven by negative positioning (shown in negative funding rates), positive ETF flows, and institutional buying.

Bitcoin ETF Flows

Although in the last two days, since Wednesday's hotter-than-expected PPI print and the hawkish Fed press conference, we've seen back-to-back outflow days, with the total ETF outflows amounting to -253.7m.

Institutional buying did help Bitcoin’s recent push higher, however, this was also the case just before Bitcoin broke down from the $90k level in late January 2026, and again following a similar chart pattern after several months of range-bound price action.

Bitcoin Institutional Buying

Alongside this, Bitcoin has rejected from $76k, which was a technical resistance on the chart. Price is currently fluctuating in the rising wedge, which we've been reporting has a bias for price to break to the downside. In order for this not to be the case, price will need to swiftly reclaim the key levels of $72k and then $74k.

Bitcoin 1D Chart

Cryptonary's Take

Bitcoin has been rejected from the $76k level, which happened to converge with a technical resistance. Price is setting a similar structure to the November-December rising wedge, which resulted in price breaking down. But Bitcoin's ETF flows have been supportive until this Wednesday's hotter PPI print and the hawkish Fed meeting that evening, whilst institutional buying has likely helped to push Bitcoin higher in recent weeks. However, this was also the case when Bitcoin broke down from its prior rising wedge back in early 2026.

Whilst some of the flows have been supportive of higher prices, we don't expect this to maintain with ongoing escalations in the Middle East (with both sides now targeting energy infrastructure), which is likely to create a new bout of inflation that keeps the Fed on hold for much longer. It also likely results in weaker growth in the months and quarters to come, which would see the Fed cut rates more aggressively, but this isn't anytime soon. The Fed will be focused on dealing with higher inflation in the short and medium-term first.

Ultimately, this isn't a constructive backdrop for risk assets, and this is perhaps why we've seen the equity indexes pull back more materially, whilst they also look like there's plenty of room to pull back more.

We remain of the view that Bitcoin will pull back to the $50k-$63k zone over the coming months. This is also where our framework identifies the strongest long-term risk/reward, based on on-chain cost basis models and historical cycle data.

In the meantime, we're exercising patience as the data suggests to us that we'll see lower prices in the months ahead.

Key Dates Ahead

• April 3: Labour market report.

This content is for informational and educational purposes only. Cryptonary is not authorised or regulated by the Financial Conduct Authority (FCA) or any other financial regulatory body. Nothing in this publication constitutes a personal recommendation or advice to buy, sell, or hold any virtual asset. Virtual assets may lose their value in full or in part and are subject to extreme volatility. You can lose all invested amounts and do not benefit from any form of financial protection. Past performance does not indicate future results.