Market Wrap: BTC, Stocks Rally in Late Session Following Fed’s Rate Increase

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Jerome Powell illustration
  • Bitcoin, ether and other cryptos had a rocky day but later rallied as well, with bitcoin retaking $40,000
  • The Nasdaq jumped late in the session, ending the day up 3.7% while the Dow increased 1.55%

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After much anticipation, the Fed finally announced a rate hike of 0.25% Wednesday. The increase was in line with expectations, but the market’s initial reaction was negative. Fed Chair Jerome Powell’s opening statement acknowledged inflation well above the target range, blaming supply chain constraints.

“Inflation remains well above our longer-run goal of 2 percent,” Powell said. “Aggregate demand is
strong, and bottlenecks and supply constraints are limiting how quickly production can respond.”

“We understand that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing and transportation.”

Today’s Federal Open Markets Committee (FOMC) meeting is the first of eight this year, Powell said, and the Fed plans to increase rates on a meeting-by-meeting basis.

While equities experienced a dip immediately following the rate hike, they later rallied, with the S&P 500 posting a 2.24% gain on the day. The Nasdaq jumped late in the session, ending the day up 3.7% while the Dow increased 1.55%.

Signaling that investors were divided on the rate change’s potential impact on crypto markets, bitcoin had a bumpy day leading up to the rate hike, but it ended stock trading hours up 5.19%. Bitcoin has recently seen a series of higher lows and lower highs, suggesting a large volatile move up or down is on the horizon.

Aave, a decentralized finance platform that allows crypto lending and borrowing, was crypto’s biggest gainer of the day among the top 100 coins by market capitalization, with a 15.24% jump.

Top stories

Story: New Digital Asset Manager Files for First ETFHire 600 New Employees

  • Digital Funds founder Michael Willis said he expects digital assets to “replace the financial legacy system”
  • The company plans to file for a spot bitcoin ETF and other crypto-focused products

Story: Fed Raises Interest Rates a Quarter Percentage Point

  • The central bank signaled seven more rate hikes this year
  • Inflation is not likely to decline until the middle of 2022, Powell said

Story: HSBC Buys Virtual Real Estate in Sandbox Metaverse

  • ”The metaverse is how people will experience Web3 [and] the next generation of the Internet,” HSBC’s Suresh Balaji said
  • Rival megabank JPMorgan unveiled a virtual lounge last month in blockchain-based world Decentraland

Story: The Y Combinator of Web3 Attracts Record Number of DAO Startups

  • “It looks like [the vast majority of] FAANG engineers and Web3 founders [want] to build in DAO tooling,” Alliance’s Qiao Wang told Blockworks
  • Ink Finance, specifically, facilitates mergers and acquisitions for DAOs

Going forward

The looming initial rate hike has finally passed, leaving investors sighing in relief that markets were largely up. But the conflict in Ukraine and its implications for broader geopolitics will continue to cause market uncertainty. Investors should assume volatility is a mainstay in the current market dynamic.

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