This is how the cryptocurrency market reacted to the US Fed’s interest rate hike

The Federal Open Market Committee decided to raise benchmark interest rates by 25 basis points during the meeting. The crypto market initially did not react to the hike, with Bitcoin and most other tokens remaining flat following the announcement.

The Federal Open Market Committee (FOMC) met late last night for the first of eight scheduled meetings in 2023. The FOMC decided to raise benchmark interest rates by 25 basis points during the meeting, as widely expected and in line with falling inflation. This is a reduction from the 50-basis-point increase in December 2022, bringing the federal funds rate to a range of 4.5 percent to 4.75 percent.

“We can now say, I believe for the first time, that the disinflationary process has begun, and we see it really in goods prices,” Powell said at a press conference following the announcement of the interest rate hike. The crypto market reacted favourably to the Fed chairman’s remarks, as expected.

The crypto market initially did not react to the hike, with Bitcoin and most other tokens remaining flat following the announcement. However, Bitcoin began to rally shortly after, rising from $22,877 early this morning to a high of $24,157 a few hours later. However, BTC has lost some of its gains since then and was trading at $23,884 at the time of writing.

Ethereum, the second-largest cryptocurrency by market cap, reacted favourably to the rate hike as well. The leading altcoin followed a similar path to Bitcoin, rising from $1,566 this morning to $1,688 a few hours later. ETH was trading at $1,673 at the time of writing, up 5.57 percent in the previous 24 hours.

The broader crypto market followed suit, with the majority of the top 100 cryptocurrencies by market capitalization turning green in the last 24 hours. As a result, the global crypto market cap increased by $40 billion, a 3.88 percent increase from the same time yesterday. Overall, the biggest gainers were Optimism (OP), which increased by 24 percent in the last 24 hours, and Loopring (LRC), which increased by 17 percent.

The FOMC was dealing with record-high inflation last year. As a result, it was forced to implement 75 basis point interest rate hikes several times in 2022. Each hike caused the crypto market, particularly Bitcoin, to plummet dramatically. Given this backdrop, market participants have greeted a 25 basis point interest rate hike with open arms. It indicates that the Fed is currently winning the battle against inflation.

However, Jerome Powell, Chairman of the US Federal Reserve, warned that there is still a long way to go before interest rate hikes can be paused entirely. “Inflation has eased slightly but remains elevated,” Powell said at a press conference following the announcement. “Given our outlook, I don’t think we’ll cut rates this year,” he added.