Fed shocks markets. Bitcoin climbs above $40,000

The Fed, after the May 4–5 meeting, raised the target range for the federal funds rate by 50 basis points to 0.75% to 1.00% per year. At the press conference, Fed Chair Jerome Powell ruled out increasing the pace of policy tightening going forward.

Ahead of the meeting, the futures market priced in a 94.3% probability that the Fed would raise rates by the maximum 75 basis points at the June 15 meeting, the largest since 1994. Currently, the indicator has fallen to 83.1%.

Powell explained that the committee is not actively considering this scenario due to expectations that inflation will stabilise after its jump to an all-time high of 8.5%.

“If inflation has peaked, the Fed has some room to exercise patience. A less aggressive policy would be positive for digital assets”, said Joe Orsini, Director of Research at Eaglebrook Advisors, in an interview with CNBC.

Powell repeatedly rejected the possibility of a recession in the economy and said he was ready to continue fighting inflation.

On May 4, the Fed also decided to begin balance-sheet runoff. In June, monthly pace will be $47.5 billion and over the next three months accelerate to $95 billion.

Against Powell’s remarks, the price of the leading cryptocurrency rose by more than $1,000 in half an hour, briefly breaking the $40,000 level. In the last 24 hours, the pace of gains eased to 1.2%. At the time of writing, the asset was trading near $39,500.

Bitcoin’s rebound coincided with gains on Wall Street. The S&P 500 closed up 2.99%, Nasdaq Composite up 3.19%. Gold rose 0.72%. The U.S. dollar against a basket of currencies fell 0.91%.

Earlier, BitMEX co-founder Arthur Hayes said the likelihood of Bitcoin dropping to $30,000 by the end of Q2 2022 due to Nasdaq’s decline.

Earlier, Glassnode analysts said the process of redistribution of coins from speculative investors to hodlers had ended and allowed Bitcoin to form a bottom.

Subscribe to ForkLog news on Telegram: ForkLog Feed — full news feed, ForkLog — the most important news, infographics and opinions