Bitcoin trades near $77,250 three days before the Federal Reserve decides on interest rates, with futures markets pricing an 86.5% chance of a quarter-point hike on Wednesday.
Custodia Bank CEO Caitlin Long argues the bigger shift sits elsewhere. She says the Treasury Department, not the Fed, now sets the terms for digital dollars.
The Fed Still Owns the Next Three Days
Chair Kevin Warsh delivers the decision on September 16, nearly four months after being sworn in. Prediction markets aggregated across Kalshi and Polymarket price the same hike above 80%.
Friday’s inflation report did most of the damage. Consumer prices rose 0.4% in August after a 0.1% gain in July, lifting the annual rate to 3.4%.
The committee already looks split. It held rates at 3.50% to 3.75% in July, but three officials dissented and wanted an increase then.
Bitcoin has already surrendered part of its recent run. Fed hike odds sat at 50/50 on September 4, when BeInCrypto reported BTC climbing toward $82,000.
Those odds have risen steadily since. BTC now trades several thousand dollars lower and was roughly flat over the past 24 hours.
Treasury Has Already Moved These Markets Once
The headline question has a precedent. Ten-year and thirty-year yields hit twenty-year highs in August, and Treasury answered on August 19 by doubling its longer-dated buybacks to $4 billion per operation.
Yields dropped on the news. They rebounded within days and wiped out the move.
That program is running right now, between September 9 and November 4. Secretary Scott Bessent could fund it from a Treasury General Account holding close to $1 trillion.
UBS strategists argued this month that the useful question is not whether the Fed moves. It is the conditions the Fed moves into, and those conditions are being set at the long end of the bond market.
Why Long Says the Fed Is Losing the Longer Fight
Long sees the same handover in rulemaking. The GENIUS Act, the 2025 law governing dollar-pegged stablecoins, takes effect on January 18, 2027. Treasury and the Office of the Comptroller of the Currency (OCC) have published proposed rules. The Fed has not.
“There’s no question Treasury is taking a lot more power from the Fed,” Caitlin Long, CEO of Custodia Bank, said in an interview.
Treasury has also claimed the power to decide which foreign stablecoins reach American markets. Long expects tokenized deposits, meaning bank dollars that move on blockchain rails, to squeeze out stablecoins. US banking groups warned of deposit flight when the law passed.
Wednesday answers the rate question. Whether Treasury can hold the long end, and who ends up writing the digital-dollar rules, runs deep into 2027.