Fed raises interest rates for the first time in 3 years…Why did Bitcoin hold $76,000?

▲ Bitcoin (BTC), Dollar ©Coinreaders

Despite the Fed's first interest rate hike since 2023, Bitcoin (BTC) showed a more limited reaction than expected, holding the $76,000 level. While the market had largely priced in the 0.25 percentage point increase, preventing a significant crypto price shock, the Fed's hint at further rate hikes this year leaves future liquidity pressure as a variable.

According to investment media FXStreet on September 17 (local time), the Fed raised the benchmark interest rate by 0.25 percentage points at the Federal Open Market Committee (FOMC) meeting, increasing the target range for the federal funds rate to 3.75-4.00%. This was the first rate hike since July 2023, with all 12 FOMC members voting in favor. The Fed stated that while economic activity is expanding at a solid pace, inflation remains high, and this action would help return inflation more quickly to its 2% target.

The Fed also kept open the possibility of further tightening. In the new economic projections, 12 out of 18 Fed officials anticipated at least one more rate hike by 2026, and the median federal funds rate for the end of the year was projected at 4.1%. This decision came despite continuous calls for rate cuts from US President Donald Trump, but the Fed prioritized price stability in its policy.

The cryptocurrency market's reaction was limited because the interest rate hike had largely been priced into the market. Bitcoin traded above $76,000 before the announcement, dipped to about $75,000 immediately after the rate decision, but then recovered the $76,000 level. Major altcoins, including Ethereum (ETH), also showed little movement. In contrast, Zcash (ZEC) showed strength relative to the market, rising 20% over the past 24 hours.

The stock market reacted more sensitively than cryptocurrencies. After the FOMC announcement, the S&P 500 fell by more than 30 points, down 0.45% for the day, and the Dow Jones Industrial Average dropped by 631 points. The Fed's rate hike marked a policy shift from its previous stance of holding rates steady, demonstrating that high inflation remains a key variable in policy decisions.

Analysis suggests that if further rate hikes follow, high borrowing costs and tight liquidity conditions could also affect cryptocurrency demand. However, the immediate impact of this 0.25 percentage point increase was limited as it was already expected. At the time of writing, Bitcoin was trading at $76,117, up 0.1% over the past 24 hours.

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