Bitcoin and ether swung sharply after the U.S. Federal Reserve raised interest rates by 25 basis points on Sept. 16, marking its first rate increase since July 2023. The move was widely expected, but a hawkish message from Fed Chair Kevin Warsh and projections for another possible hike kept pressure on crypto markets.
KEY TAKEAWAYS
- The Fed unanimously raised its policy rate to 3.75% to 4%.
- Sixteen of 18 policymakers see at least one more quarter-point hike this year.
- The Fed’s median projection puts the federal funds rate at 4.1% at the end of both 2026 and 2027.
- Bitcoin traded between $75,000 and $76,500 after the decision, while ether moved between $2,370 and $2,430.
- Bitget analyst Lewis Huang said bitcoin may absorb the rate shock better than equities, but warned that further tightening could create policy risks if energy driven inflation eases.
FED KEEPS INFLATION IN FOCUS
The Federal Open Market Committee voted 12-0 to lift the federal funds target range to 3.75% to 4%. The Fed said economic activity remained solid, while inflation was still elevated and above its 2% objective. The September projections showed a higher for longer policy path than markets had been hoping for. The median projection places the federal funds rate at 4.1% at the end of 2026 and 2027, compared with 3.8% and 3.6%, respectively, in the Fed’s June projections.
Sixteen of the 18 policymakers submitting rate projections see at least one additional quarter point increase in 2026. That signals that the September hike may not be the final move in the current tightening cycle. Warsh also made clear that policymakers do not view financial conditions as sufficiently restrictive to prevent further action.
“I would be hard pressed to describe broad financial conditions as restrictive,” Warsh said, according to The Block. He added that the committee had therefore removed some monetary accommodation.
BITCOIN AND ETHER REACT SHARPLY
The immediate reaction in crypto was volatile rather than one directional. Bitcoin traded between roughly $75,000 and $76,500 after the announcement before settling near $75,600 at the time of The Block’s report. Ether moved between approximately $2,370 and $2,430 before falling toward $2,376. The reaction reflected a market that had largely anticipated the rate increase. CME FedWatch had put the probability of a quarter point hike at about 92% shortly before the announcement.
That meant the bigger market question was not whether the Fed would raise rates, but how much additional tightening policymakers were prepared to signal. Other major cryptocurrencies showed comparatively limited immediate moves. XRP gained about 1.5%, Solana rose roughly 1%, while Zcash gained around 6.5%, according to The Block.
ANALYSTS WATCH THE NEXT MOVE
Lewis Huang, an analyst at Bitget, said bitcoin could withstand the immediate policy shock better than equities. He pointed to bitcoin’s volatility during the two FOMC trading days before the decision, when BTC moved roughly four times as much as the S&P 500.
“The market had one hike priced, and the dots have given it a sequence,” Huang said.
His concern is what happens if inflation begins cooling after the energy shock that has contributed to higher prices. Huang highlighted gasoline prices rising nearly 4% in a month and diesel prices climbing sharply, arguing that energy driven inflation can reverse faster than broader inflation. That raises the possibility of the Fed continuing to tighten after the original inflationary pressure has already started to fade, according to Huang.
Conclusion
The September rate increase was largely priced into markets, but the Fed’s projections delivered a more significant message for crypto investors: monetary conditions may remain restrictive for longer than previously expected.
For bitcoin and ether, the immediate reaction was marked by volatility rather than a sustained move in either direction. With the Fed still focused on bringing inflation back toward 2% and most policymakers seeing another hike this year, upcoming inflation and economic data will remain important for crypto markets as traders reassess the path of U.S. monetary policy.
