Fed Delivers First Hike Since 2023, Markets Yawn, Bitcoin Yodels "Is That All?" 🚀

The U.S. Federal Reserve raised its benchmark interest rate by 25 basis points on Wednesday to a target range of 3.75%-4.00%, marking the first rate hike since July 2023. The vote by the Federal Open Market Committee was unanimous, with all 12 members supporting the move, which came after markets had priced in a 93% probability of the increase via CME's FedWatch tool. The Fed's updated projections signal one more 25 basis-point hike ahead, with a median policy rate of 4.1% projected for the end of both 2026 and 2027, implying no sustained tightening cycle beyond the single additional move.

Fed Chair Kevin Warsh told reporters at his post-meeting press conference that "the economy has indeed strengthened" and that "inflation is the problem," reiterating that inflation had been "too high … for too long." He declined to comment when asked about President Donald Trump's reaction to the decision. Trump had previously said, "I'm going to put somebody that wants to cut rates," before nominating Warsh, who was confirmed in May. Warsh's Jackson Hole refrain remained the same: "We will deliver price stability. We're committed to a discipline, not a decision." He also drew a line around the central bank's role on artificial intelligence, saying, "The policy decisions on AI are made by other parts of the government. Implications of those decisions have impact on our jobs, and that's what we'll focus on."

Bitcoin traded near $75,700 immediately after the announcement, briefly spiked toward $76,000, and ground higher to $76,621 by Thursday, up 0.88% over 24 hours. Ether added 1.1% to $2,444.36, while solana (SOL) rose 2% to $100.57. The broader crypto market capitalization stood at $2.63 trillion, with the Crypto Fear and Greed Index reading 50, exactly in "neutral" territory, down from "extreme greed" readings three weeks prior. Gains were broader across risk assets, with the Dollar Index losing 0.17%, Nasdaq 100 index futures gaining 1.04%, S&P 500 futures up 0.81%, gold rising 1.02% and silver 1.52%. The two-year Treasury yield slipped 2 basis points to 4.71%, while the 10-year yield topped 5% earlier in the week, its highest since 2007.

The rally was led by smaller-cap tokens, with 94 of the 100 CoinDesk 100 constituents higher over 24 hours and the small-cap CoinDesk 80 index advancing 4.7% compared with 1.2% for the bitcoin-heavy CoinDesk 5. Zcash was the standout, jumping as much as 23% to trade near $1,425, a multi-year high, after Paradigm co-founder Matt Huang disclosed on X that his venture firm holds ZEC and has invested in the Zcash Open Development Lab. Zcash open interest climbed 37.84% to $2.2 billion over 24 hours, with the funding rate at -0.0253%, meaning shorts were paying longs. Elsewhere, NEAR rallied 15%, LIT jumped 12%, VVV added 12% and Hyperliquid (HYPE) was up 1% at $80.

Fund flows told a different story, with U.S. spot bitcoin ETFs shedding $295.98 million on Wednesday after losing $450.33 million the day before, bringing the running total since Sept. 8 to more than $1 billion across seven sessions and pushing total net assets down to $95.19 billion, according to SoSoValue. Aggregate open interest across crypto futures 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 the past day, 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 ether accounting for $60.7 million of liquidations against bitcoin's $42.4 million. Roughly $373 million in crypto liquidations hit the market over 24 hours in total.

The August inflation backdrop shaped the Fed's decision, with the Producer Price Index rising 5.4% annually, accelerating from 4.8% in July, and goods prices alone jumping 1.1% on the month. The Consumer Price Index followed a day later, rising 3.4% annually with the monthly gain accelerating to 0.4% from 0.1%, and core inflation, which excludes food and energy, picking up to 0.3% monthly from 0.2%. Goldman Sachs and Piper Sandler, which had previously projected the Fed would hold rates steady, switched to expecting a hike after the data landed. Bitcoin remains 6.9% below the $82,284 monthly high it set on Sept. 4, and traders are now watching whether the Fed's projected single additional hike will prove as anticlimactic as the first.