Bitcoin (BTC-USD) and ethereum (ETH-USD) turned lower in late Wednesday afternoon trading, wobbling between gains and losses after the Federal Reserve's earlier decision to lift its benchmark interest rate by another 75 basis points, its third hike of this size in a row.
The cryptocurrencies dropped on the initial Fed decision, and then rebounded to near intraday highs. The quick turnaround, which was also seen in the broader stock market, occurred after Fed chief Jerome Powell said at his presser that there's a possibility that the central bank would pause interest-rate increases, adding that it will be appropriate, at some point, to slow the pace of hikes.
But that recovery then led to a sharp decline back to near session lows, as market participants weighed concerns about the Fed's ability to engineer a soft landing. "The expectation that rates will need to stay restrictive for longer will hurt the chances for a soft landing," the Fed boss said.
Given crypto's relatively strong relationship with stocks over the past year, it's not surprising to see that equities moved in a similar fashion during Wednesday's session. In a volatile day that started after the Fed's announcement, the Dow Jones wrapped up the session down -1.7%, the S&P 500 slid -1.7% and the tech-heavy Nasdaq Composite fell 1.8%.
"Raising rates is negative for crypto because it means that it becomes more expensive to borrow because loan payments are larger and so it entices people to save more, which is what central banks want to clamp down on persistently high inflation," said GlobalBlock analyst Marcus Sotiriou.
Crypto-related stocks closed mixed, with Marathon Digital (MARA) +5.8%, Hut 8 Mining (HUT) +4.4%, SOS (SOS) +8.8%, Riot Blockchain (RIOT) +2.4%, Galaxy Digital (OTCPK:BRPHF) +0.6%, Bit Digital (BTBT) -1.6%, MicroStrategy (MSTR) -0.4% and Coinbase Global (COIN) -0.4%.
Along with the Fed's interest-rate decision, the central bank's dot plot signals the fed funds rate will top 4% in 2022 and peak in 2023.