Bitcoin, Ethereum falls over 1% as US Fed hikes key interest rates

Bitcoin and Ethereum prices fell after the Fed hiked interest rates by quarters of a percentage point on Wednesday.

Bitcoin, the largest token by market value, traded at about
$19,500 as of 2:47 pm Eastern time, while other major coins like
Ether, Solana and Avalanche were also little changed. The largest cryptocurrency by market cap already declined over 12% in the past two weeks in anticipation of the monetary policy change.

The total cryptocurrency market cap increased by 1.79% to $939.43 billion, over the last 24 hours. Cryptocurrencies have traded in close correlation with traditional equities following the Fed’s prior fund rate changes.

Also Read | Stocks fall as US Fed hikes interest rate by three-quarters of a point

According to CoinMarketCap, Bitcoin was trading 3% higher in the last 24 hours, while ETH rose 2%. However, they have both declined in the last seven days, and the total worth of all cryptocurrencies was below $1 trillion on Wednesday.

The US Fed rate hike mission has dealt a heavy blow to Bitcoin, Ethereum, and other major cryptocurrencies. Bitcoin is down over 50% so far this year and trading over 70% below its record high of $69,000 it had hit in November 2021.

Also Read | Treasury yields rise as US Fed raises interest rates by 75 basis points

Joshua Lim, a crypto derivatives trading specialist, said a 75 basis point hike would be “well received,” given that the probability of a larger move was priced in by traders as well.

“With Fed terminal rates in the mid-4% range, one thing we continue to hear is markets’ interest in real-world yields on-chain. This is a growing area with on-chain credit to electronic market makers being the bulk of it,” he said.

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A full-point hike this large would have been “radical and a signal to markets that the country’s central bank has lost control and is in panic mode, and that the likelihood of a recession has just increased considerably,” said Scott MacDonald, chief economist at Smith’s Research & Gradings.