Bitcoin absorbs Fed rate hike as officials see more tightening

Bitcoin demonstrated minimal reaction to the Federal Reserve's first interest rate hike since 2023, as 16 out of 18 officials anticipate additional hikes before the year's end. Despite the U.S. Federal Reserve raising its benchmark rate by 25 basis points to a range of 3.75% to 4%, Bitcoin remained near its pre-announcement level of around $76,000 on Wednesday.

The Fed's decision typically impacts stocks and other risk assets, but Bitcoin showed little immediate reaction, trading at $76,663, up 1.35% in 24 hours. Cooper Duschang, a Talos research analyst, stated that the initial response suggests crypto markets had anticipated the Fed's decision. Bitcoin's resilience was evident amid a decline in U.S. stocks, and analysts believe this resilience may be tested again if the Fed raises rates further this year.

Fed Chair Kevin Warsh noted that inflation remains high, while the economy appears to be improving. The Fed's latest projections indicate that a majority of officials foresee at least one more rate hike before the year's conclusion. Andrew Melville, head of research at Block Scholes, described another rate hike as a "more hawkish surprise than today's 25bp increase."

Despite the muted Bitcoin price action, there was movement in both the spot and derivatives markets. Perpetual futures shifted towards net selling, with significant Bitcoin and Ether futures trading, while spot demand absorbed some selling pressure through buying. Bitcoin exchange flows also showed significant activity, with around 2,170 Bitcoin moving onto exchanges and 1,260 Bitcoin being withdrawn.

Market insights lead at DWF Labs, Martin Lee, noted that higher for longer rates would lead to risk-on assets repricing this new reality.