The Federal Reserve left its interest rate at 3.50%-3.75% for the fifth time on Wednesday, and the split vote sent U.S. equities lower while Bitcoin ended the session near $64K. Bitfinex analysts read the spot Bitcoin ETF outflows that preceded the decision as temporary de-risking rather than a broader withdrawal. Options traders, meanwhile, are positioning for a $70K-$75K breakout later in the quarter.
U.S. stocks fell after Wednesday's Fed decision, while Bitcoin showed mixed results. The Dow Jones slipped 2.19% while the S&P 500 dipped 1.5%, and the tech-heavy Nasdaq posted a 1.74% loss.
Bitcoin, however, rallied to $64.7K before dropping sharply to $63.2K, then pared the losses at the end of Wednesday's trading session to trade at $64K. That capped a week in which BTC had climbed from under $64,000 to a monthly peak of $67,000 before a dip pushed it under $62,800 on Tuesday. Its market cap was down to $1.280 trillion, with dominance over the alts at 56.3%.
Three FOMC members called for a hike
The vote itself explains the mixed reaction. Nine FOMC members approved the rate pause, while three dissented and called for a 0.25% rate hike.
According to the Fed, the economy was expanding at a solid pace, but it blamed elevated uncertainty on the ongoing Middle East conflict that has kept inflation above the 2% target. Analysts held divergent views on Fed Chair Kevin Warsh's plans to rein in inflation and the potential impact on equity and crypto markets.
ETF outflows read as temporary de-risking
The crypto market de-risked ahead of Wednesday's rate decision, according to Bitfinex analysts. US spot bitcoin ETFs logged four straight red sessions between 23-28 July — in the analysts' words, "$526.5 million in net outflows".
But the analysts said the modest scale of those outflows, alongside BTC holding up relatively well, points to a temporary de-risking into the rate decision rather than a broader withdrawal. On decision day, U.S. spot BTC ETFs posted $32M in net daily inflows, breaking the four-day streak.
Ethereum was meanwhile barely holding on to the $1900 level. Bitfinex analysts viewed ETH's outperformance as possible defensive positioning to hedge against BTC losses, a read they noted could only be validated if BTC regains ground post-FOMC.
Traders price a 65% chance of a September hike
The market was pricing a 65% chance of a Fed rate hike at the September FOMC meeting, with the odds up by 10% after Wednesday's pause. If those fears return, risk assets could remain on edge.
Options traders were nevertheless betting increasingly on a potential BTC price breakout above $70K-$75K in late August and September.
Sources: AMBCrypto, CryptoPotato
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