Fed Hits 4%, Bitcoin Hits Snooze: Crypto Wakes Up Anyway 📈

The Federal Reserve lifted its benchmark federal funds rate by 25 basis points to a range of 3.75%-4.00% on Wednesday, the first increase since July 2023, in a unanimous vote by all 12 members of the Federal Open Market Committee. In its policy statement, the FOMC said "economic activity is expanding at a solid pace" and that "inflation remains elevated," adding that "today's policy action will support a timelier return to the Committee's 2 percent goal." Fed Chair Kevin Warsh, confirmed in May and now presiding over his third meeting, told reporters that "the economy has indeed strengthened" and that "inflation is the problem," later stating that "we will deliver price stability. We're committed to a discipline, not a decision." Asked directly about President Donald Trump's reaction to the decision, Warsh declined to comment.

The committee's updated "dots" projected a median policy rate of 4.1% at the end of both 2026 and 2027, implying just one further 25 basis-point move. Inflation is forecast to average 3.7% in 2026, 2.3% in 2027, and to return to 2% by 2029. Markets had priced in roughly a 90-93% chance of a hike before the decision, according to CME's FedWatch tool. Last week's Producer Price Index rose 5.4% annually, up from 4.8% in July, while the Consumer Price Index rose 3.4% annually with a 0.4% monthly gain. WTI and Brent crude traded above $100 a barrel for the first time since July, tied to the fallout from the conflict with Iran, and the U.S. 10-year Treasury yield reached 5%.

Bitcoin ($BTC) traded around $75,700 immediately after the announcement, briefly spiked to $76,000, and later pushed up to $76,621, a 0.88% gain over 24 hours, according to CoinDesk data. Ether ($ETH) added 1.1% to $2,444.36, and solana ($SOL) rose 2% to $100.57. The broader crypto market, excluding stablecoins, was valued at approximately $2.29 trillion. The recovery was led by altcoins: Zcash ($ZEC) climbed 23% to a record near $1,369 after Paradigm co-founder Matt Huang disclosed the firm owns ZEC, with ZEC futures open interest up 37.84% to $2.2 billion; NEAR rallied 15%, LIT jumped 12%, and VVV rose 12%. Ninety-four of the CoinDesk 100 constituents were higher over 24 hours, with the small-cap CoinDesk 80 advancing 4.7% versus 1.2% for the CoinDesk 5.

Despite the price rebound, fund flows remained negative: U.S. spot bitcoin ETFs shed $295.98 million on Wednesday after losing $450.33 million the day before, according to SoSoValue, bringing the total outflow since Sept. 8 to more than $1 billion across seven sessions, with total net assets down to $95.19 billion. Aggregate crypto futures open interest climbed to $64.4 billion from $59.7 billion on Monday, on $112.6 billion of 24-hour volume, with $214.3 million liquidated over 24 hours according to Coinalyze. Bitcoin open interest rose 1.41% to $26.6 billion and ether open interest added 1.39% to $16.7 billion, with the BTC aggregated funding rate at 0.0070% and a long/short ratio of 1.13.

Bitcoin remains roughly 40% below its October high of $126,000, drawing parallels to its position before the Fed's first hike in March 2022, when it subsequently rallied around 18% before falling roughly 50%. The 10-year Treasury yield stood at 5.02%, the two-year slipped 2 basis points to 4.71%, and the Dollar Index lost 0.17%, while Nasdaq 100 futures gained 1.04% and S&P 500 futures rose 0.81%. Gold added 1.02% and silver 1.52% as traders read the dot plot as the closest thing to a green light the Fed has issued in months.