Fed Increased Rates, Why is The Crypto Market Up?

The Federal Reserve raised interest rates by a quarter point on Wednesday, its first hike since 2023. Bitcoin (BTC) climbed anyway, defying the old assumption that tighter policy always hurts risk assets.

Markets had priced in the move for days. That gap between expectation and reaction explains most of Wednesday’s price action, though it is not the whole story.

The Rate Hike Was Already Priced In

Interest rate futures put the odds of a hike at 92.7% just hours before the FOMC decision, according to BeInCrypto. Traders had already positioned for it well in advance.

Bitcoin dropped to around $75,350 shortly before the decision, then jumped past $76,100 within minutes of the release. It went as high as $76,500 after the markets closed in the US, to then settled near $76,138.

BTC saw some volatility after the hike but has mostly trended upward. Image Source: CoinGecko

Research on past Fed cycles describes something similar. Traders who adjust positions before an announcement often barely react to the actual decision, sometimes even bouncing higher instead.

A Hawkish Surprise Would Have Hurt More

Scott Melker, host of Yahoo Finance’s Daily Wolf, argued a credible, one-time hike could calm long-term yields rather than spook markets. The condition was that Chair Kevin Warsh avoided signaling a longer tightening cycle.

Updated Fed projections show 16 of 18 officials now expect another hike before year-end, up sharply from nine in June. Yet the committee’s decision passed by a unanimous 12-0 vote, with the statement itself striking a measured tone.

Gold moved in a similar pattern. Spot prices spiked toward $4,360 right after the release, then sold off to settle between $4,280 and $4,300. The round trip points to quick profit-taking rather than genuine alarm.

Gold fell, then rose again, suggesting profit-taking rather than fear. Image Source: Trading Economics

Crypto-Specific Drivers Are Doing the Heavy Lifting

The Fed is not the only force moving prices this week. Bitcoin and XRP were already sliding after the CLARITY Act’s failure in the Senate, a bill meant to settle which federal regulator polices digital assets.

That setback alone wiped out more than $300 million in leveraged positions. Bitcoin and Ether ETFs then lost a combined $592 million to withdrawals on September 15, their worst single day of outflows in months.

Meanwhile, the broader top-10 board looked mixed rather than uniformly bullish. Zcash (ZEC) rallied more than 20% over seven days while XRP slipped, a reminder that altcoin-specific narratives can override the macro backdrop entirely.

With 16 policymakers still eyeing another hike this year, the next real test for crypto may not be the Fed’s next meeting. It may be whether the CLARITY Act debate reopens before then.