Fed Hikes 25 bps, Dot Plot Whispers "Just This Once" — $BTC Shrugs, Then Sprints 📈

The U.S. Federal Reserve raised its benchmark fed funds rate by 25 basis points to a target range of 3.75%-4.00% on Wednesday, its first hike since July 2023, in a unanimous vote by all 12 members of the Federal Open Market Committee. The decision lifted the range from 3.50%-3.75%, where it had been held since July, when three policymakers had already dissented in favor of tightening. Traders had priced in a 93% probability of the move via CME's FedWatch tool, up from under 50% a month earlier. Fed Chair Kevin Warsh, confirmed in May and meeting for only his third time as chair, told reporters afterward that inflation had been "too high … for too long" and that recent months' readings did not suggest underlying trends had meaningfully improved. "The economy has indeed strengthened," Warsh said. "Inflation is the problem." Asked about President Donald Trump's reaction, Warsh declined to comment, repeating his Jackson Hole line: "We will deliver price stability. We're committed to a discipline, not a decision."

Markets reacted less to the hike than to the accompanying projections. The committee's "dots" showed a median policy rate of 4.1% at the end of both 2026 and 2027, implying just one further 25 basis-point move and no sustained tightening cycle. Odds of two more hikes by year-end jumped to 40% in the aftermath, up from 10% a week earlier. The FOMC's statement said economic activity was "expanding at a solid pace" and that Wednesday's action would support "a timelier return" to its 2% inflation goal. Updated forecasts projected inflation averaging 3.7% in 2026, 2.3% in 2027, and a return to 2% only by 2029. The case for the hike had hardened after August data: the Producer Price Index rose 5.4% annually, accelerating from 4.8% in July, while the Consumer Price Index climbed 3.4% annually with a 0.4% monthly gain, driven in part by gasoline, with core inflation at 0.3% monthly. Goldman Sachs and Piper Sandler flipped to expecting a hike only after those prints landed, per Reuters.

Bitcoin traded near $75,700 immediately after the decision and as low as $75,000 in the minutes surrounding it before spiking to $76,000 and grinding higher through the next session. By Thursday, $BTC was changing hands around $76,300-$76,621, up 0.60% since midnight UTC and 0.88% over 24 hours. Ether ($ETH) added 1.1% to roughly $2,432-$2,444, while Solana ($SOL) rose about 2% to $100.57. Zcash ($ZEC) jumped as much as 23% to a record near $1,369-$1,425 after Paradigm co-founder Matt Huang disclosed on X that the firm holds $ZEC and has invested in the Zcash Open Development Lab, calling it "a private complement to Bitcoin." $ZEC open interest climbed 37.84% to $2.2 billion and the funding rate sat at -0.0253%, meaning shorts were paying longs. Aggregate crypto futures open interest rose to $64.4 billion from $59.7 billion on Monday, with $214.3 million liquidated over 24 hours, including $42.4 million in $BTC and $60.7 million in $ETH, according to Coinalyze.

Wall Street's reaction ran hotter than crypto's. The Dow fell about 600 points, or roughly 1.2%, on Wednesday, and the S&P 500 slid 0.4%-0.5%, while the 10-year Treasury yield touched 5.02%, its highest since 2007, with WTI and Brent crude trading above $100 a barrel amid the Israel-Iran conflict. By Thursday morning, the two-year Treasury yield had slipped 2 basis points to 4.71%, the Dollar Index had lost 0.17%, and Nasdaq 100 futures were up 1.04%, with S&P 500 futures gaining 0.81%, gold 1.02% and silver 1.52%. U.S. spot bitcoin ETFs shed $295.98 million on Wednesday after losing $450.33 million the day before, taking net outflows since Sept. 8 to more than $1 billion across seven sessions, per SoSoValue, with total net assets down to $95.19 billion.

Crypto's relief rally extended into the following session, with $BTC trading at $80,846 after opening at $76,355 and tagging an intraday high of $80,857 against a low of $76,236, a 5.88% single-day gain. More than $445 million in short positions were liquidated across the crypto market, with $BTC accounting for over half at $230 million, as Bitcoin's Average Directional Index sat at 40.6, above the 25 threshold used to confirm a trend, and a golden cross formed last Saturday. $BTC remains 6.9% below the $82,284 monthly high set on Sept. 4, while a Wall Street Journal survey had found Barclays, Citigroup, JPMorgan, Morgan Stanley and UBS forecasting 50 basis points of total tightening by year-end, with Bank of America, Deutsche Bank and RBC calling for 75.