Replays · FOMC · 15 Mar 2020, 21:00 UK
The Sunday night the Fed went to zero
At 21:00 UK on a Sunday, with markets closed everywhere except crypto, the Fed cut its rate to almost zero. For about an hour Bitcoin was the only liquid asset in the world that could respond, and it moved 14.7%. That is 33 times a normal hour, the largest reaction to any Fed decision in our data, #1 of 80.
Why a Sunday
The week before had been one of the worst in modern market history. On Friday 13 March Bitcoin briefly fell below $4,000 on Bitstamp, a day after its worst session of the crash, as investors sold anything that could be sold. The Fed had already made a half-point emergency cut on 3 March, and it was due to meet on 17 and 18 March. It didn't wait. On Sunday evening it cut by a full point, to a range of 0–0.25%, and said it would buy at least $700 billion of Treasuries and mortgage bonds.
An hour that ran up and back
- 1 21:00 UK: the Fed announces the cut
- 2 21:55 UK: the high, about $5,966
- 3 23:00 UK: US stock futures open and quickly hit their limit down
- 4 01:00 UK: Bitcoin back near where it started
The first reaction was measured, a gain of about 1% in five minutes. Then it built. Bitcoin was up 5% at the quarter hour, and in the last fifteen minutes of the hour it surged to a peak about 15% above the announcement price, close to $5,966. That surge is what drives the record multiple.
It did not survive contact with the rest of the market. When US stock futures opened on Sunday evening in New York, they fell straight to their daily limit. Investors read an emergency cut to zero as a sign of how bad things were. Bitcoin gave back most of its gain in the next hour, and four hours after the announcement it was just 1.1% above where it started.
The next 24 hours and the next week
| Market | 1h | 4h | 24h | 1w | × normal hour |
|---|---|---|---|---|---|
| Bitcoin | +14.71% | +1.08% | −5.31% | +14.67% | 33.0× |
| Ethereum | +11.05% | +0.56% | −9.14% | +3.40% | 19.4× |
| XRP | +10.68% | +0.77% | −6.51% | +2.00% | 15.0× |
| Litecoin | +9.93% | +0.94% | −9.08% | +1.62% | 16.2× |
Change from the 21:00 UK announcement. Only four of our crypto markets were trading on Bitstamp in March 2020.
On Monday the S&P 500 had one of its worst days on record, and Bitcoin finished the 24-hour window 5.3% lower. Ether, XRP and Litecoin all lost more. The one-week column is different: by the following Sunday, as the Fed's support began to work and the pound fell sharply against the dollar, Bitcoin was 14.7% above the announcement price. The first hour was the right direction for the week. It just wasn't the right direction for the next day.
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.