The Fed has raised interest rates for the first time since 2018 in order to combat growing inflation, which has provoked a reaction from Bitcoin.
After months of vowing to handle inflationary pressures in the United States in response to the Bank of England, the Federal Reserve has lifted interest rates for the first time since 2018.
The increase, which was a modest 25 basis point increase and in line with market forecasts, was quickly followed by Bitcoin dipping below $40,000 again before rebounding.
Prior to the meeting, Bitcoin was trading above $40,400, but it dropped to $39,337 less than 30 minutes after the announcement at 18:00 UTC. Bitcoin has now recovered, regaining control of the $40k mark and even outperforming its pre-announcement price.
The traditional market also reacted to the news; the DOW industrial average, NASDAQ, and S&P500 all lost significant gains following the rate hike announcement on Tuesday.
The Federal Reserve has been under increasing pressure to keep consumer prices under control due to rising inflation in the United States, and it is now actively reducing its stimulus to bring inflation under control.
Fed Chair Jerome Powell said during a press conference that the central bank would reduce its balance sheet at its next meeting of the Federal Open Market Committee (FOMC). The central bank has not yet decided on a timetable.
The 0.25 percent rise was accepted by an 8-1 majority, with one member advocating for a higher increase of 0.5 percent.