Bitcoin, ether swing after unanimous quarter-point Fed rate hike as Warsh takes aim at inflation

Bitcoin and ether whipsawed on Wednesday after the U.S. Federal Reserve unanimously raised interest rates by a quarter percentage point, the central bank's first rate hike in more than three years.

Bitcoin (BTC) traded between roughly $75,000 and $76,500 immediately following the decision and was changing hands near $75,600 at the time of publication. Ether (ETH) swung between about $2,370 and $2,430 before settling near the lower end of the range at $2,376.

The Federal Open Market Committee voted 12-0 to raise its target range for the federal funds rate to 3.75%-4%. The move was the Fed's first hike since July 2023, when the Powell-led central bank raised rates 25 basis points to 5.25%-5.5%.

Wednesday's increase was mostly anticipated to be the case. In the hours leading up to the decision, CME FedWatch showed traders pricing in a 92% probability of a quarter-point hike, down slightly from around 96% a day earlier.

Hawkish Warsh

Warsh was hawkish in his opening remarks, saying that the economy appears to be strengthening and that financial conditions are not particularly tight.

"I would be hard-pressed to describe broad financial conditions as restrictive," Warsh said, adding that the view was widely shared by the committee. "So we removed a dose of accommodation."

The projections also suggest further tightening is on the table. Sixteen of 18 policymakers project at least one additional quarter-point hike this year.

The decision puts the Fed at odds with remarks made earlier this month by President Donald Trump, who said the U.S. should have the lowest interest rates in the world and threatened to stop trading with countries with trade deficits with the U.S. unless the Fed cuts rates.

Warsh was tight-lipped about those threats and about the president in general when asked about them during the question-and-answer portion of the conference.

Analyst outlooks

Lewis Huang, an analyst at crypto exchange Bitget, said bitcoin could absorb more of the immediate shock than equities, noting that BTC moved roughly four times as much as the S&P 500 on the previous two FOMC trading days.

"The market had one hike priced, and the dots have given it a sequence," Huang said.

However, he argued that the path to further tightening could be tested if inflation pressure is tested by energy. He cited gasoline prices rising nearly 4% in a month and diesel climbing 60% to an all-time high, arguing that those pressures could unwind quicker than inflation.

That creates a risk, Huang said, "that the Fed is still tightening after the original energy impulse has begun to fade."

Elsewhere in crypto, the immediate reaction was mostly muted. Most top-20 cryptocurrencies were roughly flat or up 0.5% following the meeting. XRP (XRP) gained about 1.5%, and Solana (SOL) rose 1%, while Zcash (ZEC) stood out with a 6.5% gain.