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Bitcoin Blasts Through $23.5K as Powell Speaks Following Fed Rate Hike
The U.S. central bank earlier Wednesday lifted its benchmark interest rate 25 basis points.
Updated Feb 2, 2023, 4:36 p.m. Published Feb 1, 2023, 8:40 p.m.
Bitcoin jumped $700, moving above $23,600, as Federal Reserve Chair Jerome Powell suggested the U.S. central bank is seeing signs of waning inflation.
Prior to Powell speaking, the Federal Open Market Committee – as expected – lifted its benchmark interest rate by 25 basis points to a new range of 4.5%-4.75%, the highest level in 15 years. In its policy statement, the central bank said “ongoing increases” in borrowing costs will be necessary to further cool inflation.
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Data from the CME Group now shows investors pricing in an 86% chance of another 25 basis point rate hike to a range of 4.75%-5.00% at the FOMC’s March meeting.
At his post-meeting press conference, Powell led off in a hawkish fashion, reminding reporters of the destructive nature of inflation and promising the Fed’s commitment to bringing inflation down to the 2% target.
Further along in the press conference, however, Powell said that “[the] disinflationary process has started.” Those words sent bitcoin and traditional equity markets sharply higher.
The largest cryptocurrency by market capitalization, bitcoin (BTC) was trading as high as $23,627 following the comments, up more than 2% for the day. At press time, it’s settled back to $23,600. The Nasdaq is now ahead 2.6% and the S&P 500 1.6%.
Ether (ETH), the native token of the Ethereum blockchain, rose 3% to trade at $1,635 as of press time.
Crypto-exposed stocks also gained, with exchange Coinbase (COIN) rising 8% and bitcoin miner Marathon Digital Holdings (MARA) up 7%.
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Coinbase Sees Crypto Recovery Ahead as Liquidity Improves and Fed Rate Cut Odds Climb
The crypto exchange also took note of a so-called AI bubble that continues to go strong and a weaker U.S. dollar.
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- Coinbase Institutional is seeing a potential December recovery in crypto, citing improving liquidity and a shift in macroeconomic conditions that could favor risk assets like bitcoin.
- The firm's optimism is driven by rising odds of Federal Reserve rate cuts, with markets pricing in a 93% chance easing next week, and improving liquidity conditions.
- Several recent institutional developments, including Vanguard's crypto ETF policy reversal and Bank of America's greenlighting of crypto allocations, have contributed to bitcoin's rebound from recent lows.
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