Crypto Shrugs Off the Rate Shock: Ethereum Gains 8% as a Fed Hike Nears

Set Trending Topics as a preferred source on Google.

The crypto market is being handed its worst macro backdrop in months, and it is rising anyway. U.S. inflation held at 3.4% in August, core prices climbed a faster-than-expected 0.3% on the month, and bond traders now put a rate hike at next week’s Fed meeting close to a certainty, CoinDesk reports. Ethereum is up more than 8% since the release, bitcoin is holding above $79,000, and almost the entire top tier of the market is green.

The first reaction was the textbook one: bitcoin slid to $76,700 in the minutes after the data landed. That dip was bought within hours. This is where the story sits, because the rate outlook has flipped completely over the past two weeks without leaving a lasting mark on prices.

Where the Market Stands

Just How Strong the Headwind Is

The scale of the repricing in rates can be put in numbers. According to CoinDesk, traders have moved within two weeks from assuming no hike at all for the rest of the year to hedging against as much as 75 basis points of tightening. The 10-year U.S. Treasury yield climbed from around 4.60% to just shy of 5.00% over that stretch, and the more policy-sensitive two-year yield rose from 4.20% to above 4.60%. The trigger was Fed Chair Kevin Warsh’s Jackson Hole speech, which signalled that the central bank may have to act if inflation fails to cool soon.