Dovish Is a Crypto Dream, But JPMorgan Predicts Otherwise - Analysis of the Federal Reserve Market Split

The cryptocurrency market is currently experiencing polarized views on the Federal Reserve’s monetary policy direction. While most industry players hope that dovish measures represent a future with lower interest rates, banking giant JPMorgan presents a contrary prediction. This misalignment of expectations reflects a global debate about when The Fed will truly change its monetary policy course.

Federal Reserve Forecast: JPMorgan Confident in Rate Hike Coming

Contrary to the bullish sentiment within the crypto community expecting interest rate cuts, JPMorgan projects that the Fed’s next move will be a 25 basis point increase, expected to occur in the third quarter of 2027. The world’s largest bank by market capitalization states they anticipate The Fed to keep interest rates at a target of 3.5%-3.75% throughout this year before eventually raising the rate.

JPMorgan’s prediction is based on the assumption that the labor market will continue to tighten in the second quarter, while disinflation proceeds gradually and in a controlled manner. However, the bank’s analysts acknowledge an alternative scenario—if the labor market suddenly weakens or inflation drops significantly, the Fed could still consider dovish policies by the end of this year as an emergency response.

Bitcoin Sensitive to Interest Rates: Why the Crypto Market Is Waiting for Dovish Policy Changes

Bitcoin (BTC) is currently trading at $88.05K, down 2.59% in the last 24 hours. This digital asset has historically been highly sensitive to interest rate expectations, often considered a pure play on the liquidity of fiat circulating in the market. When rates are lower, investors tend to shift capital into riskier assets like Bitcoin, but the opposite occurs when interest rates rise.

Lukman Otunuga, senior market analyst at FXTM, states that although Bitcoin faces challenges in 2025, the asset has the potential to rebound in 2026 supported by lower interest rates and decreasing active supply. This outlook reflects the widespread hope within the crypto community that dovish policies are necessary for the growth of the digital ecosystem.

Most crypto market participants also expect that the next Fed chair—considering Jerome Powell’s term ends in early May—will adopt a more dovish approach compared to current officials, opening the door for rate cuts sooner than JPMorgan’s forecast.

Market Misalignment: Cut Expectations Versus JPMorgan’s Predicted Hike

A sharp contrast appears when looking at the pricing in the CME Fed Funds futures contracts. Data from these futures markets show active traders positioning for two 25 basis point rate cuts this year—significantly more dovish than JPMorgan’s projection.

This disagreement amplifies market uncertainty about the actual monetary policy path. Leading investment banks have revised their forecasts after employment data showed the unemployment rate falling to 4.4%. Goldman Sachs and Barclays now project rate cuts in June, September, and December—more aggressive schedules than previous estimates.

Alternative Scenario: When Could Dovish Policy Return to the Decision Table?

While JPMorgan maintains its rate hike prediction, the bank does not entirely rule out a shift toward dovish policies. If economic signals change—particularly if the labor market suddenly weakens in the coming months or inflation drops much faster than expected—the Fed could re-engage discussions about rate cuts by the end of the year.

JPMorgan’s forecast aligns with bullish chart pattern analysis of the 10-year Treasury yield, which indicates a potential rise toward 6% within the next year, up from current levels around 4.18%. This dynamic creates a dilemma for investors: should they wait for clearer dovish signals, or adapt to a scenario of higher interest rates in the short term before the Federal Reserve ultimately shifts its approach.