Bitcoin falls as investors weigh Fed’s latest interest rate decision

Bitcoin fell on Wednesday as investors weighed the latest policy decision from the Federal Reserve.

The cryptocurrency fell 3.5% to $27,511.00, according to Coin Metrics. Ether fell by the same amount to $1,745.67, after a big step up on Tuesday.

The Fed decided to raise interest rates by a quarter of a percentage point at the conclusion of its latest policy meeting, expressing caution over the recent banking crisis and indicating that hikes are nearing an end.

“The committee will closely monitor incoming information and consider the implications for monetary policy,” the FOMC’s post-meeting statement said.

The Fed’s forecasts call for just one more hike this year.

“The Fed’s statement of confidence in the economy is good news, but it’s also a reminder that inflation remains the top issue on policymakers’ minds,” said Callie Cox, US investment analyst at eToro. “Investors thought the banking crisis could weigh on growth enough to dampen inflation, but the Fed is taking no chances. Interest rates can stay high until we see an obvious slowdown in the labor market.”

“The trades we’ve seen dominating the markets over the past two weeks could also wind down quickly,” she added.

An increase of 25 basis points was widely expected. The decision makes it the ninth rate hike in a row and the second quarterly point increase in a row after a series of major rate hikes were implemented through 2022.

Still, comments from Fed Chairman Jerome Powell were more hawkish than the market expected, although he “kept cold water on fears over a credit crunch and deflation stemming from the banking crisis,” according to Michael Rinko, venture associate at AscendEx.

Comments by U.S. Treasury Secretary Janet Yellen that she is not considering expanding the FDIC’s $250,000 insurance limit also spooked investors, he added.

Bitcoin’s volatility has returned this month, sending the cryptocurrency’s price up more than 20% for the month and bringing its annual gains to more than 70%. At the same time, the correlation with stocks has broken, after trading in lockstep with stocks for about two years.

Still, macroeconomic factors remain the biggest drivers of bitcoin’s price, and investors will also be listening to Fed Chair Jerome Powell for long-term economic projections in addition to the rate hike decision.

Bitcoin is showing upside exhaustion and is approaching a high resistance level between $29,000 and $30,000 according to BTIG’s Jonathan Krinsky.