SKN | JPMorgan Sees Rate Hikes Ahead as Crypto Bets on Cuts Collide With Fed Reality

Key Points

• JPMorgan expects the Fed’s next rate move to be a hike in 2027, not cuts in the near term.

• CME futures and crypto analysts remain positioned for rate reductions, creating a sharp divergence in expectations.

• The outcome of this policy debate could heavily influence bitcoin and broader risk-asset performance into 2026.

JPMorgan has delivered a starkly different view of the U.S. interest-rate outlook than the one currently driving much of the crypto market, arguing that the Federal Reserve’s next move is more likely to be a hike than a cut. The call puts Wall Street’s largest bank at odds with traders and crypto bulls who continue to price in easier financial conditions as early as this year.

In a note published Friday, JPMorgan said it expects the Federal Reserve to keep policy rates steady through 2026, with the next adjustment likely being a 25-basis-point increase in the third quarter of 2027. The bank forecasts a target range of 3.5%–3.75% for the federal funds rate this year, arguing that inflation and labor-market dynamics do not justify imminent easing.

A widening gap between Wall Street and crypto expectations

That outlook clashes with market pricing and prevailing sentiment in digital-asset circles. Futures tied to the Fed’s benchmark rate on the CME Group imply that traders are positioned for two quarter-point rate cuts this year. Many crypto analysts have echoed that view, framing lower borrowing costs as a catalyst for renewed risk-taking and higher asset prices.

Bitcoin’s sensitivity to liquidity conditions has reinforced that narrative. The world’s largest cryptocurrency, often described as a high-beta play on global money supply, tends to react strongly to shifts in rate expectations. When investors anticipate cheaper capital, speculative assets typically benefit. That logic underpins the belief among crypto bulls that rate cuts could help revive momentum after a challenging 2025.

Why JPMorgan is pushing back

JPMorgan’s economists argue that the macro backdrop does not support aggressive easing. Recent U.S. employment data showed the jobless rate falling to 4.4% in December, signaling resilience in the labor market. At the same time, inflation is easing only gradually, reducing the urgency for the Fed to stimulate growth.

“However, we expect the labor market to tighten by the second quarter and the disinflation process to be quite gradual,” JPMorgan analysts wrote, adding that this dynamic keeps upward pressure on yields. Their view aligns with bullish technical patterns in long-dated Treasuries that suggest the 10-year yield could climb toward 6% from around 4.18%, a move that would challenge risk assets across the board.

The bank did acknowledge conditional scenarios where cuts could return to the table, particularly if employment weakens materially or inflation drops faster than expected. But those are framed as contingencies, not base-case outcomes.

Crypto’s rate-cut thesis remains intact

Despite JPMorgan’s caution, optimism persists within the crypto ecosystem. Lukman Otunuga, senior market analyst at FXTM, said lower rates remain a plausible tailwind over the medium term, especially if supply dynamics tighten. “Despite a difficult 2025, bitcoin may stage a comeback in 2026,” he said, pointing to thinning active supply and the potential for policy easing to reignite demand.

Adding to that optimism is speculation around leadership changes at the Fed. Many market participants expect the next chair to take a more dovish stance than Jerome Powell, whose term ends in early May. That expectation has helped keep the rate-cut narrative alive, even as incoming data complicates the picture.

Banks reassess their forecasts

JPMorgan is not alone in revisiting assumptions. Following the latest labor report, Goldman Sachs and Barclays both adjusted their timelines for easing. They now see potential cuts later in the year, with September and December emerging as more realistic windows than earlier projections centered on the first half.

What it means for markets

The divergence between JPMorgan’s outlook and market pricing underscores a growing tension across asset classes. For crypto investors, the risk is that expectations of imminent easing are premature, leaving prices vulnerable if rates stay higher for longer. For traditional markets, persistent yields could continue to favor cash and fixed income over speculative exposure.

As 2026 approaches, the debate is less about whether rates will eventually fall and more about timing. If JPMorgan’s call proves correct, crypto markets may need to recalibrate around a world where liquidity relief arrives later than hoped, reshaping strategies built on the assumption of rapid monetary easing.