Fed Delivers First Rate Hike Since 2023 and Crypto Absorbs It With Little Damage

The Federal Reserve voted 12-0 to raise its benchmark rate by a quarter point on Wednesday to a target range of 3.75% to 4%, its first increase in more than three years. Bitcoin swung between roughly $75,000 and $76,500 in the hour after the decision, and ether between about $2,370 and $2,430. Bitcoin was most recently trading near $76,500 while ether stood around at $2,440.

Most top 20 coins also shrugged the move. XRP is up nearly 2% over the past 24 hours, solana is up nearly 4% and Zcash is up a staggering 17%.

The last hike came in July 2023, under Jerome Powell, when the Fed took rates to 5.25% to 5.5%. Traders went in expecting the most recent hike: CME FedWatch showed a 92% probability shortly before the announcement.

The median policymaker now puts the federal funds rate at 4.1% at the end of this year and unchanged through next year, and 16 of 18 project at least one more quarter-point increase in 2026. Stephen Coltman, head of macro at 21Shares, said over email that the Fed has now “caught up with the market” on rate projections, which leaves the risks around the Fed “more two-sided.”

Chairman Kevin Warsh, confirmed in May, gave a hawkish account of the decision. Inflation has run above target for more than five years, he said, and the summer’s readings did not show underlying trends improving; he put the 12-month change in total PCE prices at around 3.6% last month. He also said he would not describe broad financial conditions as restrictive and that the committee shared the view. “So we removed a dose of accommodation,” Warsh said. The move puts the Fed at odds with President Trump, who has said that the U.S. should have the world’s lowest interest rates.

This was the first policy change of Warsh’s tenure. His June debut held rates steady at 3.5% to 3.75% while raising inflation forecasts, and traders spent the summer swinging between a hold and a hike. Arthur Hayes, the BitMEX co-founder, argued the hike will not bite the way the textbook says: with government debt this elevated, banks earn more on reserves and Treasury bill holders earn more on their paper, so the quantity of money keeps growing even as its price rises.

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