‘A Nothing Burger’: Why Bitcoin and Ethereum Prices Barely Moved Following the Latest Fed Rate Hike

The crypto market responded quickly — and predictably — to the latest Fed rate increase Wednesday afternoon.

Both bitcoin and ethereum’s prices dipped immediately following the Fed’s announcement that it will increase interest rates by another 75 basis points. The crypto market was already in the midst of a rough week. On Monday, both tokens had fallen more than 10% over the last week.

Crypto has been closely trailing macroeconomic events, and over the last year, the market has consistently reacted negatively to rate hikes. In a matter of minutes on Wednesday, bitcoin’s price dropped from roughly $19,500 to $18,900. Ethereum saw a more modest price drop, falling more than $50. Both drops signify a more than 3% drop after the Fed made its announcement.

After an initial rebound immediately following those drops, bitcoin fell back to around $18,800 and ethereum fell back to just below $1,300 late Wednesday afternoon. But these drops were still relatively small compared to previous Fed rate increases. So what gives? It has to do with the market’s expectations, according to experts. 

“Everything is relative to expectation, not exactly what happens, but what happens relative to expectations,” said Joel Kruger, a Market Strategist at LMAX Group, a financial technology firm headquartered in London that operates foreign currency and crypto exchanges. “Short of some wild price swings in the immediate aftermath, things have played out as expected.”

Here’s what investors need to know about what’s happening with crypto today.

How Market Expectations are Driving Crypto Prices Right Now

Experts anticipated that the Fed would raise rates by 75 basis points. Because those predictions came true, the crypto market didn’t see extreme volatility in its prices today, at least nothing out of the ordinary. This is in contrast to July when the Fed announced its first 75 basis point hike (which was significant).

The Fed has remained consistent in its message throughout this year. Fed Chairman Jerome Powell shared hawkish sentiments –– indicating more aggressive action might be taken in the future –– toward inflation and further rate increases in late August. As such, Wednesday’s news was perfectly in line with expectations, and thus the crypto market didn’t experience a big shake up, experts say.

“It’s a bit of a nothing burger,” said Andy Long, CEO of White Rock Management, a digital asset mining company headquartered in Switzerland. “There was a 10-20% chance of something a bit more hawkish, but that didn’t happen. Everybody expected 75 [basis points], and so you can see this afternoon that downward pressure relaxing a bit.”

Long says we’ll continue to see short-term impact on…