Fed Rate Hike Sends Markets into a New Cycle

The Federal Reserve made its first rate hike since July 2023 on September 16, raising the benchmark federal funds rate by 25 basis points to 3.75%-4%. This move was unanimous among FOMC members and is seen as a signal that tightening is not over yet.

Fed Chair Kevin Warsh described current inflation levels as 'unacceptable' and emphasized the need for financial conditions to be recalibrated to reach the central bank's 2% target. The median dot plot suggests one more potential 25 basis point hike before year-end, indicating that this rate increase is not a one-time event.

Bitcoin seemed unfazed by the news, maintaining its price near $76,000 in the hours following the announcement and posting modest daily gains. In contrast to traditional markets, which initially sold off but rebounded the next day due to easing oil prices, Bitcoin's spot demand remained consistent, supporting its value.

However, not all was rosy on the crypto front. Bitcoin ETFs reported significant outflows in recent sessions, with hundreds of millions in net redemptions. The Senate also recently rejected the Clarity Act, a piece of legislation that would have provided clearer regulatory frameworks for digital assets.