Bitcoin and Ethereum Dive Amid Federal Reserve’s Rate Hike Pause: A Thorough Analysis

Federal Reserve Announces Interest Rate Decision

The U.S. Federal Reserve (Fed) has made the latest announcement on its interest rate decision, stating a temporary halt on raising rates and maintaining the federal rate at 5.00-5.25%. This marks the first pause after ten consecutive rate hikes by the Fed since March 2022. However, Federal Open Market Committee (FOMC) officials have hinted at a hawkish stance, implying two more rate hikes could occur by the end of the year.

FOMC Hawks’ Forecast

Despite the pause in rate hikes, the FOMC’s dot plot data is sending hawkish signals. Almost half of the 18 FOMC members predict that by the end of 2023, the rate will fall within the 5.5%-5.75% range, with a median rate of 5.6%. This implies that within the four remaining FOMC meetings in 2023, rates could be raised two more times if each hike is calculated at 1 point.

Fed Chairman’s Perspective

Fed Chairman Jerome Powell, at a later press conference, stated that the impact of monetary tightening policy has not fully emerged. Almost all officials believe that it would be appropriate to raise interest rates further this year. However, there is a long way to go to recover to the 2% inflation rate.

（Image via Associated Press）

‘Fed Mouthpiece’ Views

Nick Timiraos, a Wall Street Journal reporter known as a ‘Fed mouthpiece,’ pointed out that while the Fed maintained interest rates unchanged in June, it also suggested that this could be a very brief pause. If economic and inflation data do not cool further, they may lean towards raising interest rates next month.

Cryptocurrency Reactions

Perhaps affected by the Fed’s hawkish stance, Bitcoin initiated a rapid drop early in the morning, falling to a low of $24,820, breaking the $25,000 mark and reaching a low for the past three months. Other leading cryptocurrencies, like Ethereum and Binance Coin, exhibited similar trends but with more dramatic declines.

（Image via TradingView）

（Image via TradingView）

US Major Indexes Display Mixed Results

Interestingly, the U.S. major indexes showed mixed results amidst this turbulence. While the cryptocurrency market saw a general downturn, three of the four major U.S. stock indices showed an upward trend.

Here’s the performance of the four major U.S. indices:

• The Dow Jones Industrial Average fell 232.79 points (0.68%) to 33,979.33 points.
• The Nasdaq index rose 53.16 points (0.39%), closing at 13,626.48 points.
• The S&P 500 index increased by 3.58 points (0.08%), settling at 4,372.59 points.
• The Philadelphia Semiconductor Index climbed 56.08 points (1.52%), ending at 3,739.75 points.

Keywords: U.S. Federal Reserve, Interest Rate Decision, FOMC, Hawkish Stance, Jerome Powell, Bitcoin, Cryptocurrency, Stock Market, Ethereum, Binance Coin, Dow Jones Industrial Average, Nasdaq, S&P 500, Philadelphia Semiconductor Index