Bitcoin Holds Steady as Fed Hikes Interest Rates Again

Bit­coin and the rest of the cryp­tocur­ren­cy mar­ket has held steady fol­low­ing the Fed­er­al Reserve’s announce­ment today that the cen­tral bank has hiked inter­est rates by 25 basis points.

The move, which aligned with mar­ket expec­ta­tions, rais­es rates from 4.5% to 4.75%, the high­est the fed­er­al funds rate has been in decades. The Fed began aggres­sive­ly rais­ing rates last year in an attempt to cool record-high infla­tion, which has neg­a­tive­ly impact­ed the val­ue of stocks, equi­ties, and cryp­to assets.

Bit­coin, the biggest cryp­tocur­ren­cy by mar­ket cap, was at the time of writ­ing trad­ing for $23,029—a 0.3% increase in the past hour, accord­ing to CoinGecko. It’s now down 66.4% from its all-time high of $69,044.

Ethereum, the sec­ond biggest dig­i­tal asset, was up the same amount, trad­ing hands for $1,577. ETH is down 67.6% from its peak of $4,878.

Both assets are up in the past week—Bitcoin by near­ly 2%; Ethereum by 1.3%. 

Coin­Shares Head of Research James But­ter­fill told Decrypt  that the Fed­er­al Reserve’s state­ment today added “noth­ing new to real­ly move the mar­kets.” Fed­er­al Reserve Chair­man Jerome Pow­ell “has tried to express hawk­ish­ness by stat­ing that the job isn’t done, but the mar­kets aren’t buy­ing it,” he added. 

But the U.S. stock mar­ket, which dig­i­tal assets have fol­lowed this year and last, dropped then jumped fol­low­ing the news: at the time of writ­ing, the S&P500 gained 0.2%, while the Nas­daq rose 0.2%.

White Lion Cap­i­tal co-founder John Nance told Decrypt that the “big ques­tion on everyone’s mind is, is the bot­tom in for risk assets?” 

“With respect to Fed mon­e­tary pol­i­cy, bot­toms and tops in pre­vi­ous mar­ket cycles have come before/after the peak/trough in rates,” he said.

Bit­coin has typ­i­cal­ly fol­lowed the stock mar­ket because it is a “risk-on” asset. This means its price can be volatile—just like equi­ties. Investors have sold “risk-on” assets as the Fed has upped inter­est rates to get 40-year high infla­tion under control. 

This is because when inter­est rates are high, investors pre­fer “safe-havens” like gold or the U.S. dollar. 

And today, the Fed said it would con­tin­ue upping inter­est rates—though not as aggres­sive­ly as last year, when it upped inter­est rates by 75 basis points four times.

“The Com­mit­tee antic­i­pates that ongo­ing increas­es in the tar­get range will be appro­pri­ate in order to attain a stance of mon­e­tary pol­i­cy that is suf­fi­cient­ly restric­tive to return infla­tion to 2 per­cent over time,” the Fed­er­al Reserve said in a statement. 

“Infla­tion remains too high,” Pow­ell said in a press con­fer­ence Wednes­day. “The job is not yet done.”