This is what we call baking in the bad news.
Crypto markets jumped modestly after the U.S. Federal Reserve raised its benchmark interest rate on Wednesday by 0.25%, a hike that was widely expected by investors and was apparently factored into token prices leading up to the decision.
Bitcoin ticked up 2.6% to $40,600, and Ether rose almost 3% in mid-afternoon trading New York time, according to data from CoinGecko.
Prior to the decision, futures markets indicated a 98.3% probability of such a hike.
Investors have been nervously watching the Fed as consumer prices surged 7% in 2021 to a 39-year high. The central bank signalled it would hike interest rates to rein in inflation, a move equity investors tend to dislike because it makes bonds more attractive. Crypto has been closely correlated with stocks for the last few months. Commodity prices are also skyrocketing, especially as Russia’s war on Ukraine shakes up the oil and natural gas markets as well as the production of metals and staples such as wheat.
Now investors are bound to watch the Fed closely to see if it will take a more hawkish stance and increase rates even more. Such a move would likely be a bearish signal for asset prices including crypto, which is why we saw a global selloff in January after mere hints that loose monetary policy was drawing to an end.
Some are already bracing for more rates with gallows humor:
Crypto markets rose yesterday after news broke that ConsenSys has raised $450M for a $7B valuation. Investors included tech giant Microsoft, Singaporean sovereign wealth fund Temasek, and Softbank Vision Fund 2. The company plans to purchase Ether with the funds.