Recaps · FOMC · 13 Dec 2017, 19:00 UK
A Fed day in a mania
December 2017 was the peak of the first big crypto boom. The Fed's third hike of the year was fully expected, and stocks barely moved. In crypto, the evening belonged to the altcoins. XRP began a rally that took it to a record the next day.
- Decision
- Wednesday 13 December 2017, 19:00 UK
- Rate
- +25bp to 1.25% to 1.50%
- Votes
- Two dissents, Evans and Kashkari (Fed)
- Press conference
- Yellen's last scheduled one as chair
- Bitcoin at decision
- $16,000
The decision
The Fed raised its target range to 1.25% to 1.50%. Two officials, Charles Evans and Neel Kashkari, voted to hold (Fed statement). Yellen noted that tax changes would likely give the economy some lift, though their size and timing were uncertain (Fed transcript). The S&P 500 ETF was +0.17% after an hour.
Bitcoin, steady; altcoins, not
- 1 19:10 UK: low, about 0.9% down
- 2 22:00 UK: high, about +3.1%
Bitcoin dipped briefly, then rose to +1.70% at the hour, #15 of 80 Fed decisions at 3.8 times a normal hour, and about 3.1% up at 22:00 UK. In late 2017, moves like that happened on most days, with or without a Fed meeting.
XRP rose +10.3% in the first hour, 15.5 times its normal hour, and +86% in a day. CNBC reported that it rose 89% on 14 December to a record 89.2 cents and briefly became the third-largest cryptocurrency. CoinDesk linked the rally to Korean trading volume and news of Japanese and Korean banks testing Ripple-based payments. Ether was +22% over the week.
Separating the Fed from the noise
This recap is a caution against reading every move on a Fed day as a Fed reaction. A quarter-point hike that everyone expected did not cause an 86% move in XRP. The test is whether other markets moved too, and here stocks did not. Compare the jobs report five days earlier, when Litecoin rose 24% in four hours, or Bitcoin's first hour at the March 2018 Fed decision, 0.4%, after the boom had ended.
A quick test helps here. XRP's first hour was 15.5 times its normal size; Bitcoin's was 3.8 times. When a Fed decision really moves crypto, the large coins tend to move together. After the cut to zero on 15 March 2020, Bitcoin rose 14.7% and Ether 11.1% in the first hour. At all seven hikes of 2022, Bitcoin and Ether moved in the same direction at both one hour and four hours. A single coin running far ahead of the rest points to a story of its own.
Sources: release time and figures from the Federal Reserve's statement and target range (FRED DFEDTARU). Crypto: Bitstamp 5-minute candles; SPY/QQQ: IEX. No consensus forecasts are shown because they are proprietary; comparisons are with the previous release. “× normal hour” compares the first-hour move with the median move in matched quiet hours. How we measure it.