The market did not experience the severe fluctuations that were previously feared, and Bitcoin basically held around $75,000.

Written by: Blockchain Knight

In the early hours of today, the Federal Reserve announced an interest rate hike of 25 basis points, raising the target range for the federal funds rate to 3.75%—4%. This is the first rate hike by the Federal Reserve since the start of 2023, and the decision was unanimously approved by all 12 members of the FOMC.

After the announcement, the market did not experience the severe fluctuations that were previously feared; Bitcoin basically held around $75,000, while U.S. stocks showed a noticeable decline, and U.S. Treasury yields rose again.

The core reason is that the rate hike itself had already been digested by the market in advance. Prior to the meeting, the interest rate market had a relatively high expectation for this hike, so what truly determined market trends was not whether to hike or not, but how the Federal Reserve plans to move forward.

Wash's speech sent a clear signal that inflation remains the most pressing issue to address.

Wash stated that the U.S. economy has strengthened further since the June meeting, the labor market remains generally stable, inflation is still relatively high, and the rate of price decline has not reached the level policymakers hope to see.

He also mentioned that the issue of stabilizing prices has persisted for many years, and given the current economic environment, one cannot prematurely relax focus on inflation just because employment has not deteriorated significantly.

On the other hand, inflation is still above the long-term target of 2%, so monetary policy needs to maintain sufficient restrictiveness.

It is also noteworthy that the interest rate forecast has changed; the latest dot plot from the Federal Reserve shows that the median forecast for the federal funds rate at the end of 2026 has risen to 4.1%, up from 3.8% in June.

Meanwhile, the Federal Reserve expects the PCE inflation rate for 2026 to be 3.7% and the core PCE inflation rate to be 3.4%, both markedly higher than the 2% target.

This means the market needs to pay attention to the fact that U.S. interest rates may remain high for a longer period and further rate hikes cannot be ruled out.

However, Wash did not provide a definitive roadmap for the future. He emphasized that future policy will still depend on inflation, employment, and economic data, and no advance commitments would be made regarding actions in the next meeting.

This is also why the market did not operate according to the narrative of "rate hike = risk assets plummet."

Bitcoin had already gone through an adjustment before the meeting; the market, in addition to trading on the Federal Reserve's interest rate hike expectations, was also influenced by the lack of clear progress on legislation, leading to a notable increase in long liquidations in the derivatives market, with some bearish factors already reflected in prices before the meeting.

Therefore, when the rate hike was implemented, and the policy outcome did not significantly exceed expectations, the market naturally did not experience a sell-off of the same intensity again.

Another change worth noting is that data shows the correlation between Bitcoin and assets like the U.S. dollar, S&P 500, and Nasdaq has decreased, with regulatory policies, capital flows in the cryptocurrency market, and industry-specific events increasing their influence on short-term prices.

However, this does not mean that the Federal Reserve's influence on Bitcoin has diminished; high interest rates still mean higher capital costs, and higher U.S. Treasury yields will increase the opportunity cost of holding dollar-denominated assets.

For Bitcoin, the current price performance only indicates that short-term selling pressure has been controlled; what truly determines future trends is still the changes in liquidity and market risk appetite.