First Fed Rate Hike Since 2023 Leaves Bitcoin at $76K

The Federal Reserve delivered its first rate hike since July 2023 on Wednesday, lifting its target range by 25 basis points to 3.75%-4.00%. Bitcoin absorbed the move and traded near $76,260 on Thursday, up 0.5% over 24 hours. Traders are already looking past it toward October, where another increase is now on the table.

Key Takeaways

• The Fed raised rates by 25 basis points to 3.75%-4.00% in a 12-0 vote.
• Bitcoin pushed into the $78,000-$79,000 area before settling near $76,260.
• Goldman Sachs now expects another rate hike in October.

A 12-0 Rate Hike Built on a Warsh Inflation Warning

There was no split on the committee this time. The Federal Open Market Committee voted 12-0 on September 16 to move the federal funds target to 3.75%-4.00%, ending a stretch without a rate hike that went back to July 2023.

The reasoning is laid out in the policy statement the Fed released after Wednesday’s meeting. “Inflation remains elevated,” the committee wrote, adding that the decision will support “a timelier return” to its 2% goal. The same text describes economic activity “expanding at a solid pace” while uncertainty stays high, partly because of geopolitical developments.

That language did not come out of nowhere. Late in August, Bitcoin slid below $78,000 as the Fed started signaling higher rates, and the September meeting turned that signal into an actual move.

Fed Chair Kevin Warsh leaned hard on inflation at the September 16 meeting materials and press conference page. He said inflation remains “too high” and framed the rate hike as removing “a dose of accommodation.” Read that way, the September increase looks less like a finish line and more like a first step.

The numbers behind the call are stubborn. Annual inflation stood at 3.4% in August and the PCE index is running around 3.7%, close to double the target. Oil back above $100 a barrel, driven by tensions around Iran, adds another source of pressure. Warsh summed up the backdrop in three parts: the economy has strengthened, inflation has not slowed, and geopolitical tensions have intensified.

Bitcoin Trades Between $76,000 and $79,000 After the Decision

Crypto markets had largely priced in the rate hike. Bitcoin climbed into the $78,000-$79,000 range on Thursday morning, then gave most of it back to settle near $76,260. Over seven days, the largest cryptocurrency is still down 4%.

The $79,000 level carries some recent history. On September 8, Bitcoin dropped under $79K two days before the US inflation print, and Thursday’s morning push stalled in that same zone.

Altcoins did better out of the relief. Solana rose close to 3% to sit just below $100, while Zcash jumped 23% to about $1,369. Ether and the rest of the large caps followed the broader rebound in stock futures overnight into Asian trading hours.

Liquidations over 24 hours reached $347.46M, with $203M coming from short positions and $144M from longs. The single largest liquidation was an $18.38M Bitcoin contract on Hyperliquid. Short sellers took the bigger share of the damage as prices swung both ways.

Crypto-linked stocks had a rougher Wednesday. Coinbase fell 3.75% to $165.65, Robinhood lost 4.35% to $105.65, Strategy slipped 2.96% to $125.76, and Circle dropped 5.63% to $81.44. The 10-year Treasury yield is hovering near 5%, its highest level since October 2023, a setting that echoes the late-August wait when Bitcoin paused at $77K ahead of the new Fed chair’s speech.

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• Wallet Flaw: Europe Demands an Alert Within 24 Hours

October Shapes Up as the Next Rate Hike Test

Goldman Sachs has reversed its call. The bank had expected a September increase followed by a pause, and now expects another 25-basis-point rate hike in October. Futures traders are pricing just over 50% probability for that scenario.

The Fed’s own projections point the same way. A strong majority of policymakers expects at least one more rate hike this year, and the median projection still sits at 4.1% for the end of 2027, with no cuts penciled in before 2028. For Bitcoin holders, that means no easing appears anywhere in the official rate path.

Warsh’s stance has been consistent for months. In June, Warsh ruled out rate cuts while Bitcoin was trading at $58,000, and nothing in Wednesday’s messaging suggests a turn in the other direction before year-end.

Two more central banks fill out the near-term calendar. The Bank of England announces its decision on Thursday at noon London time, with its rate at 3.75% and a hold expected, and the Bank of Japan follows on Friday.

In the short run, Bitcoin is trading against a tightening backdrop, with the 10-year yield close to 5% and a second rate hike openly discussed. Over the next few months, every inflation release before October will shape the committee’s path, and with it the appetite for risk assets across crypto.

Follow the story on Cryptonomic.