Cryptos erase gains after Fed signals more rate hikes, higher terminal rate

Cryptocurrencies have mostly turned red in Wednesday afternoon trading after the Federal Reserve, in its looming battle against inflation, signaled further interest-rate increases and projected a higher terminal rate. After advancing as much as 3.2% just moments before the Fed's monetary policy decision, bitcoin ( BTC-USD ) erased all of its gains, rising 0.1% to $17.75K as of 3:33 p.m. ET. Ethereum ( ETH-USD ), though, turned negative after climbing 2.3% pre-Fed, now down 0.9% to $1.30K. Risk assets started to sell off after the U.S. central bank decided to lift its benchmark rate by 50 basis points to a target range of 4.25%-4.50%, the highest level in 15 years, as expected. That represented a downshift from the 75-bp hikes at each of its previous four meetings. At the same time, the Fed's dot plot ultimately supported a higher for longer narrative, as the officials' median projection now expect the federal funds rate to reach 5.1% in 2023, compared with 4.6% in its September projection. Fed policymakers expect to pause rates at that level with cuts not starting until 2024. Fed Chair Jerome Powell reiterated that monetary policy will need to be restrictive "for some time" in an effort to get inflation down toward the central bank's 2% objective. He noted that the past two months of softer CPI data weren't enough for him to be confident that inflation is falling in a meaningful way. "The Fed is moving into the position that a hard landing is acceptable so long as it brings down inflation," said Cullen Roche, chief investment officer at Discipline Funds. "There's no pivot coming. They're gonna be tight through all of 2023 unless things really get crashy." On a surprising note, crypto-related stocks traded mostly in the green, with MicroStrategy ( NASDAQ: MSTR ) +2.4% , Coinbase Global ( NASDAQ: COIN ) +4.9% , Silvergate Capital ( NYSE: SI ) +2.5% , Core Scientific ( NASDAQ: CORZ ) +56.1% , and Riot Blockchain ( NASDAQ: RIOT ) +2.1% among the biggest winners. See why SA contributor The Digital Trend thinks Cathie Wood's $1M bitcoin prediction "might be right."