Bitcoin drops to $64K as Fed signals rate hikes, Illinois enacts crypto tax
In brief
- Bitcoin dropped to $64,000 following the Fed's hawkish stance under new chair Kevin Warsh
- Federal Reserve lifted 2026 rate projection to 3.8%, signaling at least one hike this year
- Illinois enacted 0.2% tax on crypto activity, projected to raise $60 million annually
- Half of Fed members now favor a rate hike by 2026 amid firm labor markets and elevated inflation
- Dow fell 507 points; crypto stocks MSTR and STRC declined sharply
Fed Hawkishness Rattles Markets
The Fed held its benchmark rate at 3.50% to 3.75% on Wednesday, a fourth straight hold. But the real shock came in the dot plot. The Fed lifted the median year-end 2026 rate projection to 3.8% from 3.4% in March, indicating at least one hike this year rather than a cut.
Half of Fed members favor a hike as soon as 2026, citing a firm labor market and inflation at a three-year high. Market expectations swung sharply. Odds of a Fed hike by the September meeting rose to roughly 70%, up from about 30% a day earlier. The December meeting now prices an 88% chance of at least one hike, and expectations for any 2026 rate cut have collapsed to zero.
The broader market felt the pressure. The 2-year Treasury yield jumped more than 16 basis points to 4.22%. The Dow fell 507 points after hitting a record earlier in the day. Crypto-linked equities took a hit too. MSTR fell 5% and STRC made a new low at $89.
Illinois Pioneers State Crypto Tax
In a separate regulatory move, Illinois Governor J.B. Pritzker signed a $55.9 billion state budget that includes the Digital Asset Privilege Tax Act. Illinois enacted a 0.2% tax on crypto activity that takes effect January 1, 2027, making it the first US state to tax digital asset transactions directly.
The scope is broad. An Illinois resident who buys, sells, moves, or has crypto held through an exchange will effectively pay the 0.2% in fees. Digital asset brokers must register with Illinois, remit 0.2% of the value involved, and face felony charges for violations. Out-of-state brokers are covered once their Illinois sales pass $100,000.
The Illinois crypto tax is projected to raise about $60 million. Industry groups including the Crypto Council for Innovation and a16z have called it the first state tax that hits people simply for transacting in crypto.
Frequently asked questions
Why did Bitcoin drop after the Fed announcement?
The Fed signaled potential rate hikes in 2026 under new chair Kevin Warsh, who removed the easing bias from the statement. Half of Fed members favor a hike by 2026, and market odds of a September hike jumped to 70%. Higher rates typically pressure risk assets like Bitcoin.
What is the Illinois crypto tax?
Illinois enacted a 0.2% tax on all crypto transactions—buying, selling, moving, or holding through an exchange—effective January 1, 2027. It's the first U.S. state to tax digital assets directly. Brokers must register with the state and face felony charges for violations.
How much is Illinois expected to raise from the crypto tax?
The tax is projected to generate about $60 million annually. It applies to all residents and out-of-state brokers once their Illinois sales exceed $100,000.
