Recaps · FOMC · 5 Nov 2020, 19:00 UK
The Fed was the quiet part
The Fed met while the US presidential election was still being counted. It changed nothing. Bitcoin was in the middle of a strong rally and kept climbing through the evening, ending four hours later near its highest level since January 2018.
- Decision
- Thursday 5 November 2020, 19:00 UK
- Rate
- Held at 0% to 0.25%
- Purchases
- Continued at least at the current pace (CoinDesk)
- Same day
- Bitcoin above $15,000, first since January 2018 (CNBC)
- Bitcoin at decision
- $14,955
The decision
The Fed kept rates near zero and kept buying Treasuries and mortgage bonds, as economists expected (CoinDesk). Powell said the economy had recovered strongly in the third quarter, but that the pace of improvement had moderated and the rise in Covid cases was "particularly concerning" (Fed transcript).
A steady climb
- 1 20:00 UK: about +1.3%
- 2 22:55 UK: high, about +4.4%
Bitcoin was flat on the statement, +0.01%, and rose slowly: +1.31% at 20:00 UK, #20 of 80 Fed decisions at 2.9 times a normal hour. Most of the gain came late, after US stocks had closed, and it reached about 4.4% up at 22:55 UK. The S&P 500 ETF was +0.15% at the hour.
| Market | 1h | 4h | 24h | 1w | × normal hour |
|---|---|---|---|---|---|
| Bitcoin | +1.31% | +4.14% | +3.44% | +7.77% | 2.9× |
| Ethereum | +0.76% | +1.90% | +7.70% | +11.16% | 1.4× |
| XRP | +0.15% | +0.76% | +5.49% | +3.51% | 0.2× |
Change from the 19:00 UK decision.
Momentum, not the Fed
CNN reported that Bitcoin had risen about 40% since early October and had more than doubled in 2020. The New York Post linked the rally to election uncertainty and hopes for more stimulus. CoinDesk noted that the Fed's balance sheet had grown by about $3 trillion that year, which had made Bitcoin popular as an inflation hedge. The Fed's decision that evening added nothing new to that story, and Bitcoin kept trending.
The lesson is that a "no news" Fed day in a strong trend usually leaves the trend in charge. The same happened at the December 2020 meeting, when Bitcoin was 3.8% up at four hours. Bitcoin was +7.8% a week after this decision, and Ether +11%.
The meeting before it, in September 2020, was also a hold with no new tools, and Bitcoin was 0.25% lower after an hour, a quiet reaction in a quiet market. In November the decision was just as uneventful, but the trend was much stronger. The difference between the two evenings came from the market, not the Fed.
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.