Bitcoin dropped about 2% to around $75,000 after the US Senate failed to pass a key procedural vote on the Clarity Act, a proposed regulatory framework for digital assets. The setback added fresh uncertainty to the crypto market, which was already facing pressure from rising bond yields and elevated oil prices.
Global markets are bracing for the Federal Reserve’s first interest rate increase in more than three years, with traders pricing in a 92% chance of a hike at Wednesday’s policy meeting, according to CME Group. The decision, alongside the updated dot plot and a press conference by Fed Chairman Kevin Warsh, is expected to set the tone for risk assets including cryptocurrencies.
Citi strategists remain bullish on global stocks, saying equities can keep rising through mid-2027 as long as earnings growth remains resilient. The bank’s historical review of Fed hiking cycles since the 1970s shows stocks often struggle in the first three months after an initial hike, but 12 months later they are higher in the majority of cases, averaging gains of around 7%. Citi also found that developed markets outside the US, particularly Japan and Europe, tend to outperform after the first increase, while value and cyclical sectors historically do better than growth and defensive stocks.
The rate environment is shifting beyond the US. Citi economists expect the Bank of Japan to hike this week, have added two more rate increases to their European Central Bank forecast, and now anticipate two hikes from the Bank of England. The 10-year US Treasury yield has climbed above 5%, its highest level since the financial crisis, while Brent and West Texas Intermediate crude have been trading above $100 per barrel, keeping inflation concerns alive.
US stock futures edged higher in premarket trading, with the S&P 500 up 0.2% and the Nasdaq 100 up 0.4%, as oil prices pulled back slightly. However, the broader risk backdrop remains tense. Brent Wilsey, chief investment officer at Wilsey Asset Management, warned that a hold could damage the Fed’s credibility and reignite concerns that the central bank is caving to political pressure. Markets are also watching August retail sales data and a homebuilder sentiment index due Wednesday.
