Market Wrap: Bitcoin and Stocks Rise After Fed Raises Rates; Growth Concerns Ease

Bitcoin (BTC) rose toward $40,000 during the New York trading day. The price rise offset a brief period of selling immediately after the U.S. Federal Reserve raised its policy interest rate by a half-percentage point, its biggest hike since 2000.

The Fed also approved plans to start reducing its bond portfolio, which will ease monetary stimulus that has contributed to the rise in speculative assets, including stocks and cryptos.

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The Federal Open Market Committee, which sets interest rates, stated that ongoing rate increases within the target range will be appropriate, which suggests another hike could occur at the Fed’s meeting next month, especially if inflation remains elevated.

Rising rates typically precede slowing economic growth, which could weigh on asset prices. Still, during a press conference on Wednesday, Federal Reserve ChairJerome Powell stated that the U.S. economy remains very strong and could handle rising interest rates.

Most cryptocurrencies traded higher over the past 24 hours, tracking moves in stocks. Meanwhile, gold ticked higher as the U.S. dollar declined.

The bitcoin Fear & Greed Index ticked lower into “extreme fear” territory, indicating a lower appetite for risk among crypto traders.

The index has remained in “fear” territory over the past few months, marking a decisive shift in “extreme greed” sentiment in November of last year.

An increase in trader sentiment would require a rise in BTC’s price, with a gradual increase in trading volume and volatility. Generally, high buying volumes in a positive market on a daily basis indicate bullish activity, according to Alternative.me, which constructs the index.

Bitcoin’s dominance, or BTC’s market capitalization relative to the total crypto market cap, accounts for 10% of the Fear & Greed Index.

BTC is outperforming alternative cryptos (altcoins) so far this year, but gave up some of its lead in the past few days. That could point to improving sentiment among traders over the short term, especially as stocks and cryptos enter a seasonally strong period.

Most digital assets in the CoinDesk 20 ended the day higher.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.