The Fed raised rates by 25 basis points on September 16, bringing its target range to between 3.75% and 4%. Grayscale views this as a mid-cycle adjustment, comparable to the isolated hike in 1997. The central bank's projections suggest another increase before the end of the year.
The Fed hikes rates to between 3.75% and 4%
On September 16, 2026, the FOMC raised its target range by 25 basis points in a unanimous 12-0 vote. This marks the first US rate hike since July 2023.
Inflation remains above the Fed's 2% target. Projections released the same day forecast a 3.7% increase in the Personal Consumption Expenditures (PCE) price index in 2026. Excluding food and energy prices, the projected rise remains elevated at 3.4%.
According to the median projection, PCE inflation is expected to return to 2% in 2029.
Grayscale sees a mid-cycle adjustment
In a note published on September 17, Zach Pandl, Head of Research at Grayscale, believes this hike should not trigger a significant shift in capital allocation. He characterizes the move as a mid-cycle adjustment rather than a change in the cycle.
A comparison with 2022 helps clarify his reasoning. Starting in March 2022, the Fed initiated a full tightening cycle, raising rates by 5.5 percentage points through July 2023.
Pandl believes this weighed on bitcoin during the last bear market by increasing the opportunity cost of holding an asset that generates no yield.
The 1997 episode offers another point of comparison. In March of that year, Alan Greenspan’s Fed raised rates by 0.25 percentage points in a single move, before the Nasdaq continued its upward trend.
Pandl estimates that one or two additional 0.25 point hikes in 2026 should not significantly alter capital allocation.
Another hike remains widely expected
Projections published by the Fed suggest that rates could rise further by the end of the year. The median projection places the federal funds rate at 4.1% by the end of 2026, compared to 3.8% in the June projections.
The majority of Fed members support another hike before year-end. 16 of the 18 participants foresee a rate higher than its current level.
Markets are aligned. As of September 18, CME FedWatch estimated an 88.2% probability of another rate hike at the December 9 meeting.
Rates do not affect all crypto assets the same way
Pandl highlights that the impact of a rate hike varies by asset.
Bitcoin generates no income for its holder. To make a profit, its price must appreciate. When rates rise, holding bitcoin becomes less attractive to investors who can place their capital in interest-bearing assets.
Stablecoins, however, may benefit from this environment. A large portion of their reserves is invested in short-term interest-bearing assets, such as US Treasury bills. When rates rise, these reserves yield more.
Circle, for instance, recorded $668 million in revenue from its reserves in the second quarter of 2026.
The effects are therefore very different depending on the asset. For Grayscale, the current rate hike remains primarily a mid-cycle adjustment and should not significantly shift capital allocation in crypto.
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The next FOMC meeting will take place on October 28, followed by December 9. In the meantime, markets will continue to monitor rate developments and their impact on various crypto assets.