Replays · FOMC · 31 Jul 2019, 19:00 UK

A historic cut, an ordinary hour

Some Fed decisions matter more to stock traders than to anyone in crypto. This was one of them. The first US rate cut in more than a decade sent the S&P 500 ETF down 1.1% within an hour. Bitcoin's hour ranked #41 of 80 FOMC decisions in our data, right in the middle, at 1.1 times a normal hour.

Upper bound of the Fed funds target range at each change from December 2015. The July 2019 cut is marked. Source: Federal Reserve, FRED DFEDTARU.

What the Fed did

At 19:00 UK the Fed lowered its target range by a quarter point, to 2.00% to 2.25%, ending a run of nine hikes since late 2015. It was the first cut since December 2008. The cut itself was widely expected. What moved markets came half an hour later, in the press conference, when Jerome Powell described it as a "mid-cycle adjustment" rather than the start of a long series of cuts.

Stocks fell, Bitcoin shrugged

Change one hour after the 19:00 UK decision.

Both stock ETFs were nearly flat for the first half hour, then dropped as Powell spoke. The S&P 500 ETF ended the hour -1.08% and the Nasdaq 100 ETF -1.30%.

Bitcoin dipped 0.46% on the first candle, from $10,032, and then drifted sideways. Four hours later it was +0.18%. The one coin that did move was Litecoin, up 2.1% in the hour and 3.3% in four, ahead of its scheduled block-reward halving on 5 August.

1 19:00 UK: the decision
2 19:30 UK: press conference begins

Bitcoin, five-minute candles around the decision. % from the 19:00 UK price of $10,032. Source: Bitstamp.

The week that followed

A quiet hour was followed by a loud week. On 1 August President Trump announced new tariffs on Chinese imports, and on 5 August the Chinese yuan weakened past 7 to the dollar. Bitcoin rose 17.4% over the week from the decision, to around $11,800. Litecoin, by contrast, was 6.4% lower after its halving passed.

The one-week figure shouldn't be read as a reaction to the cut. Bitcoin's first hour showed almost nothing, and the gains came with the trade dispute. If anything, this decision is a useful baseline: a widely expected Fed move, even a historic one, doesn't always produce a big crypto reaction.

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.