"US rate hike" expectations emerge, JPMorgan downgrades hopes for rate cuts

The most anticipated “interest rate cut window” in the cryptocurrency market may be about to fall short. A recent policy forecast by JPMorgan has caused a stir—this Wall Street giant predicts that the Federal Reserve will not only hold steady this year (2026), but may also shift direction in Q3 2027, moving towards rate hikes rather than cuts. This view sharply contrasts with mainstream expectations in the crypto space, breaking many investors’ dreams of falling borrowing costs.

According to Reuters, JPMorgan’s specific forecast is that the Fed will keep rates in the 3.5% to 3.75% range, and after waiting for the right moment, raise by 1 basis point (25 basis points) in Q3 2027. This forecast is based on the strong performance of the US labor market—latest December 2025 employment data shows the unemployment rate unexpectedly falling to 4.4%, reflecting that the economic fundamentals remain quite resilient.

Market’s Interest Rate Cut Dream Shattered, Crypto Faces Reversal of Expectations

In stark contrast to JPMorgan’s conservative stance, traders and crypto analysts generally remain optimistic. The CME FedWatch tool shows that market participants are heavily betting on at least two rate cuts this year, each by 1 basis point. Many industry analysts even believe that once borrowing costs decrease, it will help rekindle risk appetite in the overall economy and financial markets, thereby benefiting risk assets like Bitcoin.

FXTM senior market analyst Lukman Otunuga said, “Although 2026 will be challenging, with shrinking active supply and supported by rate cut expectations, Bitcoin is expected to rebound strongly in the future.” However, such optimistic forecasts now face a direct challenge from JPMorgan’s predictions.

US Treasury Yields Rise, Overvalued Assets Under Pressure

JPMorgan’s rate hike forecast aligns with the recent technical pattern of the 10-year US Treasury yield. The institution points out that, as the benchmark for global asset pricing—the 10-year US Treasury yield—may challenge its historical high of 6% within the next year (currently around 4.18%). If this scenario materializes, it will put substantial pressure on overvalued assets and risky investments, which is undoubtedly negative for growth-oriented crypto assets.

Rising US Treasury yields symbolize increasing capital costs, prompting many investors to shift towards lower-risk fixed income instruments, reducing allocations to high-risk assets. This capital flow shift is likely to dampen the performance of cryptocurrencies like Bitcoin.

Resilient Job Market Fuels US Rate Hike Expectations

The core factor driving JPMorgan’s forecast is the extraordinary resilience of the US labor market. The unexpected drop in the unemployment rate to 4.4% is enough to keep Fed Chair Jerome Powell and his team cautious—under a healthy employment backdrop, rushing to cut rates would seem unwise.

This strong economic fundamental has already prompted other Wall Street firms to revise their forecasts. Goldman Sachs and Barclays initially expected the Fed to start rate cuts in March or June, but now have pushed the timing to September or December. These revisions reflect a growing market expectation that the US rate hike cycle will be extended.

Can the New Chair Rewrite the Outlook?

Interestingly, crypto bulls have not given up hope; they are pinning their hopes on a leadership change at the Fed. Current Chair Jerome Powell’s term will end this May, and the market generally expects his successor to be more dovish than Powell, potentially opening up new political space for rate cuts.

However, JPMorgan analysts also admit that if the labor market shows clear signs of fatigue or inflation drops significantly, the Fed could pivot later this year. But based on current data, the likelihood of such a shift seems low. The strengthening of US rate hike expectations is now a new risk factor that the market must seriously consider.