The Federal Open Market Committee sets the US benchmark interest rate roughly eight times a year. Rates set the price of money, which sets appetite for risk assets. When rates fall, borrowing is cheap and capital moves out along the risk curve toward assets like crypto. When rates rise, safe assets pay more and risk assets compete against a higher hurdle.
What the FOMC actually does
The Federal Open Market Committee meets roughly eight times a year and sets the federal funds rate, the benchmark that ripples through every other interest rate in the economy. It also publishes projections and a statement, and the chair holds a press conference afterward.
Markets rarely react to the decision itself, because the decision is usually priced in beforehand. They react to the gap between what was expected and what happened, and to the language about what comes next.
Why crypto cares
Crypto has no earnings, no dividend and no coupon. Its value rests entirely on what people are willing to pay, which makes it unusually sensitive to how much money is looking for a return and how much return is available elsewhere.
When a government bond pays five percent risk free, a volatile asset paying nothing has to justify itself against that. When the same bond pays one percent, the calculation changes completely.
The transmission mechanism
Three channels connect a rate decision to a crypto price:
- Discount rates. Higher rates lower the present value of future cash flows, which drags on every long duration asset. Crypto behaves like an extremely long duration asset.
- Liquidity. Cheap money finds its way to the riskiest end of the market. Expensive money retreats from it first.
- The dollar. Higher US rates tend to strengthen the dollar, and a stronger dollar is generally a headwind for dollar priced assets.
How to read a decision without guessing
You cannot predict the outcome, and you can understand what is already expected. Interest rate futures imply a probability for each possible decision, and those probabilities are public.
If the market prices a cut at 90 percent and a cut arrives, very little happens. If it prices a cut at 90 percent and no cut arrives, the reaction is violent. The surprise is the signal, not the decision.
What to actually do
Almost certainly nothing. Trading around scheduled announcements is a professional activity with terrible odds for everyone else, because the move happens in seconds and reverses regularly.
What is genuinely useful is knowing the calendar so that a sharp move does not feel like a mystery, and not using leverage into a scheduled event.
Common questions
Does the Fed control crypto prices?
No, and it strongly influences the conditions crypto trades in. Rates are one input among several, including regulation, ETF flows and the supply cycle.
Should I trade FOMC days?
We do not give trading advice. What is observably true is that these days produce violent moves in both directions within minutes, which is exactly the environment where leverage ends accounts.
How do I know what is already priced in?
Interest rate futures imply probabilities for each outcome and are published publicly. Reading them before a meeting tells you what would count as a surprise.
Where to go next
Confused by a market move?
Bring the chart and the headline and we will work out together what actually happened. Understanding it afterward is far more useful than predicting it beforehand.