Fed Holds Rates at 3.75%-4% as Bitcoin Nears $81K: What’s Next?

The US Federal Reserve concluded its two-day interest rate meeting today, announcing it is holding interest rates at 3.75% – 4.00%. This aligns with a recent CoinPedia report in which more than 90% of Wall Street analysts projected no change in interest rates, largely due to the proximity of the US midterm elections.

Bitcoin and stocks react to paused rate adjustments

At press time, Bitcoin (BTC) has responded in a slightly positive manner, gaining 0.18% in the day to trade at $80,681. Over the same period, short liquidations mounted to $45.39 million, accounting for 77.4% of all liquidations.

As for stocks, Wednesday markets opened on a 2-day 2% rally attributed to high anticipation of Anthropic’s IPO filing and a record-breaking earnings report from semiconductor company SK Hynix.

However, soon after the rate announcement, stocks experienced minor sell-offs after a divide in the Federal Open Market Committee (FOMC) spiked cautionary sentiment. While most members (10 of 12) voted to leave the benchmark rate unaltered, Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack voted instead for a 25 basis points (bps) hike.

The Nasdaq composite edged slightly lower, dropping 0.13%, while the S&P 500 rose 0.33% as defensive buyers offset the sellers.

Another factor affecting investor sentiment was the Fed’s communication of hawkish future policy actions. The central bank shifted its opinion on US economic growth from “solid” to “strong”, adding that inflation “remains elevated”. This increased the likelihood of a December rate hike to 85% – something that would negatively impact cash flow and debt for high-valuation tech companies.

Source: CME Group FedWatch Tool 

What next for Bitcoin, Stocks and Bonds?

Chilled sentiment in stocks caused the 10-year Treasury yield to rise to 5.03%, with higher yields expected should Fed impose higher rates.

Bitcoin now has a crucial $81,000 ceiling to break through, after which it could retest the $84,500 resistance. Should buyers, however, fail to sustain this momentum, a slip to $77,000 is likely. The rainbow chart, nonetheless, shows a high likelihood of an upcoming rally that tends to follow after extended consolidation.

Source: CoinGlass

Meanwhile, the next trajectory for tech stocks is highly dependent on market reaction following the release of Alphabet and Microsoft earnings reports later today.