Crypto market briefly up, then falls as US Fed leaves interest rates unchanged

The global cryptocurrency market rose along with smaller gains in the broader equity and bond markets in the aftermath of a Federal Reserve Open Market Committee statement Wednesday afternoon that it would leave interest rates untouched at near zero but expects to raise them soon. As the market digested the latest report, prices began trending downward.

Fast facts

  • “With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the central bank’s board of governors wrote.
  • The Fed also indicated that with job growth strong and unemployment low, it will continue to reduce its balance sheet and by March expects to cease purchases.
  • Bitcoin rose 2% to around US$38,000 in the 24 hours ending Wednesday afternoon. The top 10 cryptocurrencies — with the exception of stablecoins including Tether, US Dollar Coin and stablecoin-related token Luna — were up as much as 6% compared to the prior day.
  • But within a few hours of the Fed’s statement, the broad equity, bond and crypto markets began to fall, erasing any gains from the prior 24 hours.
  • Since the Covid-19 outbreak in 2020, investors have turned to Bitcoin as a hedge against inflation, touting its 21 million maximum BTC supply as a safe haven.
  • But for more than a month, Bitcoin has underperformed, failing to break through the highly anticipated US$100,000 level to close out 2021, and remaining below the US$40,000 mark for the past week, according to Coingecko data