Replays · FOMC · 27 Jan 2021, 19:00 UK
Stocks down, crypto up
The last week of January 2021 belonged to GameStop and the WallStreetBets crowd. Into that market came a Fed meeting that changed nothing. Bitcoin, which had briefly dropped below $30,000 that morning, rose for two hours, while US stocks fell.
- 1 19:00 UK: statement
- 2 21:00 UK: Bitcoin's high, about 6.6% up
The setting
The Fed kept rates at 0–0.25% and its bond buying at about $120 billion a month, as expected. CoinDesk reported that morning that Bitcoin had briefly traded as low as $29,453 before the meeting. The day before, Elon Musk had tweeted "Gamestonk!!", and Reuters reported that GameStop's shares had risen more than sevenfold since 12 January.
Two markets, two directions
Bitcoin was $29,740 at 19:00 UK and rose 2.1% on the first candle. It was +3.5% after an hour, 7.8 times a normal hour and #6 of 80 Fed decisions in our data, and +6.2% at two hours. Ether tracked it closely.
US stocks went the other way. The Nasdaq 100 ETF was -1.1% after an hour and -1.3% at the close. Bitcoin's gain faded after the US close, leaving it +2.9% at four hours.
Litecoin and Chainlink both lagged Bitcoin in the first hour, at +1.6% and +2.1%, but caught up later. At 24 hours Chainlink was +14.3%, ahead of Bitcoin's +10.0%.
The week that followed
Two days later, early on Friday 29 January, Musk added "#bitcoin" to his Twitter bio. CNBC reported that Bitcoin jumped as much as 20% that morning. Bitcoin was +10.0% at 24 hours and +25% a week after the statement. XRP was +58% over the same week, with the jump coming at the end of the week rather than on the Fed day.
The Fed hour itself is still unusual. A no-change decision, a falling stock market, and a crypto rally of more than 6% in two hours make an unusual combination. That week, crypto had its own drivers, and the Fed was only one of them.
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.