Replays · FOMC · 2 Nov 2022, 18:00 UK
A rally that lasted half an hour
The statement on 2 November 2022 hinted that the pace of hikes might slow. For half an hour, markets celebrated. Then Jerome Powell started talking. Crypto's real story that week, though, began in a CoinDesk article published the same day.
Six hikes in eight months
This was the Fed's fourth hike of 0.75 points in a row, taking the target range to 3.75–4.00%. Rates had started the year near zero. The new statement said the Fed would take into account the lags with which policy affects the economy, which markets read as a hint that smaller hikes were coming.
Thirty minutes up, then down
- 1 18:30 UK: high, as Powell's press conference starts
- 2 21:25 UK: Bitcoin's low, about 1.8% down
Bitcoin was $20,433 at 18:00 UK and rose about 1.8% in thirty minutes. Ether was up 3.6% and Solana 4.5% at the same point. In the press conference, Powell said it was "very premature" to think about pausing rate hikes, and the gains disappeared. Stocks reversed with crypto: the S&P 500 ETF went from +1.1% at thirty minutes to -2.2% at two hours.
Measured at the hour, the round trip hides most of this. Bitcoin was +0.12% after an hour, 0.3 times a normal hour, which ranks #68 of 80 Fed decisions in our data, near the bottom. It was -1.4% at four hours.
The pound had its own problem. Sterling was -2.48% against the dollar at the London 4pm fix that day, with the Bank of England due to announce its own decision the next day.
The week
The same day, CoinDesk published details of the balance sheet of Alameda Research, the trading firm linked to the FTX exchange, showing that much of it was made up of FTX's own FTT token. That report set off a run on FTX in the following days. By the end of the one-week window, FTX had halted withdrawals. Solana, whose ecosystem had close ties to FTX and Alameda, was -52.6% after a week. Bitcoin was -17.2%.
The rate decision produced a small first hour. The week after it was far worse, and the cause was an exchange, 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.