Bitcoin Price Reacts Frantically as US Fed Hikes Interest Rates by 50bps

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The Federal Open Market Committee’s half-percentage-point hike in the federal funds rate came after four months of 75-basis-point hikes. The Federal Reserve also forecasts a further 75 basis point increase in the cost of borrowing by the end of 2023. Bitcoin price climbed 3.39% on Wednesday at some point after the decision before falling to 17 $822.

Bitcoin price, along with the rest of the crypto market, noted a strong reaction following Wednesday’s Federal Open Market Committee (FOMC) meeting. The Federal Reserve’s decision to slow the pace of the fed funds rate hike was welcomed, but the increase still didn’t sit well with most people.

Federal Reserve rate hike takes a turn

The Federal Reserve (Fed) announced on December 14 that the federal funds rate would be raised by 50 basis points (bps). The FOMC’s decision came in line with expectations, marking a deviation from the past four months of a 75 basis point rise. Commenting on the rise, the FOMC said,

“The Committee seeks to achieve a maximum employment and inflation rate of 2% in the long term. In support of these objectives, the Committee decided to raise the target range for the federal funds rate to 4-1/4 to 4-1/2%.

The Federal Reserve forecasts another 75 basis point increase in borrowing costs by the end of next year, in addition to a near slowdown in economic growth.

The FOMC further said it remains committed to bringing personal consumer expenditure (PCE) inflation back to its 2% target. According to the Committee, continued increases in the target range will be helpful in creating the right monetary conditions to bring inflation down to 2% over time.

The Federal Fund’s FOMC rate hike came a day after the release of Consumer Price Index (CPI) data. The Bureau of Labor Statistics noted a 7.1% increase for the month of November, which was lower than the 7.3% expected.

Bitcoin price moves

Bitcoin price reacted to the FOMC decision but did not take any particular direction. Following the announcement, prices soared and BTC rose 3.39% to trade at $18,373. However, this rise did not last long as a few hours later the king’s coin fell to $17,822.

Total Crypto Market Cap

The rest of the crypto market reacted similarly as the total market capitalization rose to $848 billion before declining to its current value of $824 billion. Looking ahead, positive signals are needed to drive the recovery as the crypto market has only improved by around 10% in almost a month.

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