Bitcoin and ether swing after the Fed raises rates by a quarter point
Fed raises rates for the first time since July 2023
The U.S. Federal Reserve raised interest rates by a quarter of a percentage point on Wednesday, its first increase in more than three years. Bitcoin and ether moved sharply up and down as traders reacted to the decision.
The Federal Open Market Committee, the group inside the Fed that sets rates, voted 12-0 to raise the target range for the federal funds rate to 3.75%-4%. The federal funds rate is the interest rate banks charge each other for overnight loans, and it influences borrowing costs across the economy.
Bitcoin traded between roughly $75,000 and $76,500 right after the decision and was near $75,600 at the time of publication. Ether moved between about $2,370 and $2,430, then settled near the lower end of that range at $2,376.
Key numbers from the vote and the market moves
- The FOMC raised the target range to 3.75%-4% in a 12-0 vote.
- The last hike was in July 2023, when the Fed raised rates by 25 basis points to 5.25%-5.5%.
- Before the decision, CME FedWatch showed traders pricing in a 92% chance of a quarter-point hike, down slightly from about 96% a day earlier.
- Sixteen of 18 policymakers expect at least one more quarter-point hike this year, according to the Fed's projections.
- Most top-20 cryptocurrencies were roughly flat or up 0.5% after the meeting. XRP gained about 1.5%, Solana rose 1%, and Zcash stood out with a 6.5% gain.
What Warsh said about financial conditions
In his opening remarks at the press conference, Warsh struck a firm tone on inflation. He said the economy appears to be strengthening and that financial conditions are not particularly tight.
"I would be hard-pressed to describe broad financial conditions as restrictive," Warsh said, adding that the committee widely shared that view. "So we removed a dose of accommodation."
The Fed's latest projections point to rates staying at 4.1% through the end of 2027, and the projections also suggest more tightening is possible.
Bitget analyst says bitcoin may absorb the shock better than stocks
Lewis Huang, an analyst at crypto exchange Bitget, said bitcoin could take more of the immediate shock than equities, which are shares of publicly traded companies. He noted that bitcoin moved roughly four times as much as the S&P 500, a major U.S. stock index, on the previous two FOMC trading days.
"The market had one hike priced, and the dots have given it a sequence," Huang said. The "dots" refer to the rate projections that policymakers submit.
Huang also said the path to further tightening could be tested if energy prices feed inflation pressure. He cited gasoline prices rising nearly 4% in a month and diesel climbing 60% to an all-time high, and argued those pressures could fade faster than inflation itself. That creates a risk, he said, "that the Fed is still tightening after the original energy impulse has begun to fade."
Warsh stayed quiet on Trump's push for lower rates
The decision puts the Fed at odds with comments President Donald Trump made earlier in September, when he said the U.S. should have the lowest interest rates in the world and threatened to stop trading with countries that have trade deficits with the U.S. unless the Fed cut rates.
When asked about those threats and about the president during the question-and-answer part of the conference, Warsh gave little away. He was tight-lipped on both topics.
What is still unclear
- No further rate decision has been made. The expectation of at least one more hike this year comes from policymakers' projections, not from an announced plan.
- It is not known how the recent moves in gasoline and diesel prices will affect inflation, or whether they will change the Fed's path. That view came from Huang.
- Warsh did not answer questions about the president's comments, so the Fed's response to them is not clear.
- Bitcoin and ether prices change quickly, so the levels reported here are only where they stood at the time of publication.
Why this matters for crypto traders
Interest rate decisions affect how much investors are willing to pay for riskier assets, and crypto is often traded alongside stocks in that group. This meeting mattered to traders because it was the first hike in more than three years and because the Fed's own projections point to more tightening ahead.
Wednesday's reaction also shows how closely crypto prices track Fed news. Bitcoin and ether both swung within minutes of the decision, even though most other large cryptocurrencies barely moved.
At least one more hike is projected this year
According to the Fed's projections, 16 of 18 policymakers expect at least one additional quarter-point hike this year. The same projections indicate rates remaining at 4.1% through the end of 2027. Huang's warning about energy prices suggests the market may keep testing how far the Fed will go.
