On July 28, 2025, at 2:00 AM Beijing time, the Federal Reserve announced its latest interest rate decision—raising the benchmark rate by 75 basis points to a target range of 2.25%–2.50%. This marks the second consecutive 75-basis-point hike, the most aggressive tightening pace since the Paul Volcker era in the 1980s. With a cumulative 225 basis points in rate hikes already this year, the Fed continues its aggressive campaign to combat inflation.
Yet, despite the magnitude of monetary tightening, financial markets responded positively—especially risk assets. The reason? Signals from Fed Chair Jerome Powell that future rate hikes may slow, depending on incoming economic data.
Market Reaction: Risk-On Sentiment Returns
Powell’s post-meeting remarks struck a cautiously optimistic tone. He acknowledged that while further tightening is likely, the pace could moderate in the coming months. This perceived "dovish pivot" ignited a broad rally across asset classes.
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Tech Stocks Lead Wall Street Gains
U.S. equities opened sharply higher, led by technology stocks. Within 20 minutes of trading, the S&P 500 surged over 1%, while the Nasdaq Composite jumped nearly 200 points and quickly gained more than 2%. By Wednesday’s close, the Nasdaq had soared 4.06%, closing at 12,032.42—the largest single-day gain since April 6, 2020.
This rally underscores investor confidence that the Fed may avoid overtightening, even amid persistent inflation pressures.
Crypto Markets Rally: Bitcoin and Ethereum Break Key Levels
The positive macro sentiment spilled over into cryptocurrency markets, which had been trading sideways for days amid broader economic uncertainty.
According to market data, Bitcoin (BTC) spiked as much as 10% immediately after the Fed announcement, briefly breaking above $23,000**. At the time of writing, BTC was holding around **$22,728, reflecting a 24-hour gain of 7.67%.
Meanwhile, Ethereum (ETH) showed even stronger momentum, surging over 16% intraday before settling near $1,611, with a 24-hour increase of 12.72%. This marks a significant recovery from recent lows, with ETH now up more than 50% from its bear market bottom.
For the past 10 days, Bitcoin has oscillated between $21,000 and $23,000, forming a consolidation zone that traders see as a potential springboard for further upside. Ethereum’s breakout above the psychologically important $1,600 level signals growing investor appetite for smart contract platforms.
Why Did Crypto Rally on a Rate Hike?
Historically, rate hikes are negative for risk assets due to higher borrowing costs and reduced liquidity. However, this time the market had already priced in the 75-basis-point increase. What mattered more was Powell’s indication that future hikes would be data-dependent—a sign that the most aggressive phase of tightening may be nearing its peak.
Market analysts believe that the crypto sector has already factored in much of the Fed’s hawkish policy outlook. After losing over $1 trillion in total market capitalization since early 2022, digital assets appear to be stabilizing.
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Macroeconomic Crossroads: Inflation vs. Recession Fears
The Federal Reserve now faces a delicate balancing act. On one hand, inflation remains stubbornly high, forcing the central bank to maintain a tight monetary stance. On the other, rising interest rates and balance sheet contraction risk slowing economic growth—potentially tipping the U.S. into recession.
Recent forecasts suggest that second-quarter GDP may contract, fueling concerns about a "hard landing." While higher rates should eventually cool inflation, they also dampen consumer spending and business investment.
With four more FOMC meetings scheduled this year, market expectations point to interest rates reaching 3.5%–4% by year-end. Whether this will be enough to bring inflation back to the Fed’s 2% target remains uncertain.
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A Pattern of Volatility: Will the Rally Last?
While Wednesday’s rally was encouraging, history suggests caution. In both May and June, Wall Street saw similar "relief rallies" following rate hikes—only to reverse sharply the next day.
- On May 4, the Fed raised rates by 50 basis points. The Dow surged over 900 points—but plunged more than 1,000 points the following session.
- On June 15, another 75-basis-point hike triggered a broad market advance. Yet the Nasdaq tumbled over 4% the next day.
Such whipsaw patterns highlight the fragility of sentiment in an environment defined by macro uncertainty.
What This Means for Crypto Investors
Although cryptocurrencies are increasingly viewed as a distinct asset class, they remain sensitive to macro forces—particularly liquidity conditions and investor risk appetite. The current rally may reflect short-term optimism rather than a sustained trend.
That said, Ethereum’s strong performance could signal renewed interest in decentralized applications and Web3 innovation—especially as network upgrades continue to improve scalability and efficiency.
FAQ: Understanding Today’s Market Moves
Why did Bitcoin go up when the Fed raised rates?
Typically, rate hikes hurt risk assets. But this move was fully anticipated. The key driver was Powell’s hint that future hikes might slow down—seen as bullish for markets.
Is this the start of a new bull run for crypto?
Not necessarily. While prices are recovering, sustained growth depends on broader macro stability, regulatory clarity, and adoption trends—not just Fed policy.
How does Fed policy affect Ethereum differently than Bitcoin?
Both react similarly to macro shifts. However, Ethereum often shows stronger momentum during rallies due to its utility in DeFi and NFTs—making it more sensitive to investor sentiment about innovation.
Could another rate hike cause crypto to crash again?
Possibility exists if future hikes exceed expectations or if economic data worsens. However, many downside risks are already priced in after last year’s drawdowns.
What should investors watch next?
Key indicators include upcoming CPI data, employment reports, and Fed speakers’ commentary—all of which will shape market expectations for future policy moves.
Is now a good time to buy crypto?
It depends on your strategy. Short-term volatility remains high. Long-term investors may view current levels as an entry point if they believe in digital assets’ structural growth.
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Final Thoughts: Cautious Optimism Ahead
The Fed’s latest decision reaffirms its commitment to fighting inflation—but also reveals growing awareness of economic risks ahead. For crypto markets, this creates a complex but potentially constructive backdrop.
With Bitcoin stabilizing above $22K and Ethereum reclaiming $1.6K, technical indicators suggest improving momentum. Yet lasting recovery will require more than just relief rallies—it demands sustained institutional interest, improved on-chain activity, and favorable regulatory developments.
As we move through the second half of 2025, all eyes will remain on Washington—and Wall Street—for signals that could shape the next phase of the digital asset cycle.