Bitcoin absorbs Fed rate hike as officials see more tightening

Bitcoin showed little immediate reaction to the Fed’s first rate increase since 2023, but 16 of 18 officials expect at least one more hike before the end of the year.

Bitcoin held near its pre-Fed announcement levels of around $76,000 on Wednesday despite the US Federal Reserve raising its benchmark interest rate for the first time since 2023 to address persistently high inflation. 

The Fed’s Federal Open Market Committee on Wednesday voted unanimously to raise rates by 25 basis points to a target range of 3.75% to 4%, a move that typically puts pressure on stocks and other risk assets. However, Bitcoin showed little immediate reaction to the announcement and was trading at $76,663 at the time of writing, up 1.35% in 24 hours.

“The initial reaction suggests the Fed’s decision was largely anticipated by crypto markets. Bitcoin has remained relatively resilient, holding broadly around pre-announcement levels even as equities moved lower,” said Cooper Duschang, research analyst at Talos in comments shared with Cointelegraph. 

Bitcoin’s price resilience came despite US stocks slipping on Wednesday. Crypto analysts said this resilience could be tested again if the Fed raises rates further this year. 

During the FOMC press conference, Fed Chair Kevin Warsh said that inflation remains too high while the US economy looks to be strengthening. The Fed’s updated economic projections show a majority of officials see at least one more rate hike before the end of the year.

Andrew Melville, head of research at Block Scholes, said another increase in rates would be a “more hawkish surprise than today’s 25bp hike.”

However, Duschang said that while Bitcoin’s price action was muted, there was movement in the spot and derivatives markets. 

“Perpetual futures have shifted towards net selling, led by approximately $82 million in Bitcoin and $68 million in Ether over the past hour,” he said. “In contrast, Bitcoin recorded around $15.5 million of net spot buying, suggesting spot demand is absorbing some of the selling pressure coming through derivatives.” 

Related: Bitcoin awaits Fed rate decision below $76K as analysis discounts ‘dovish surprise’ odds

Duschang also noted significant Bitcoin exchange flows, with around 2,170 Bitcoin moving onto exchanges following the rate increase, followed by a withdrawal of 1,260 Bitcoin. 

“Rather than a uniform risk-off response, investors appear to be actively repositioning as they digest the Fed’s message,” he said. “The key question now is whether Bitcoin’s resilience and spot demand hold as attention shifts from today’s widely anticipated hike to the prospect of further tightening.” 

Martin Lee, market insights lead at DWF Labs, said the renewed “hawkish stance” of “higher for longer” rates would lead to risk-on assets “repricing this new reality.” 

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• Federal Reserve
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