The US Federal Reserve on Wednesday raised its benchmark interest rate by 75 basis points to a range of 3.75% to 4%, a move that was highly anticipated by market participants, including crypto traders.

It is the fourth consecutive rate hike introduced by the Fed this year, designed to cool the economy and fight record inflation.

Bitcoin reacted with an immediate 3% bullish reversal, rising to $20,700 on the 18:00 (UTC) candle. But the cryptocurrency lost 0.60% of its gains after Federal Reserve Chairman Jerome Powell sent mixed messages at the press conference.

The Fed stated that it was considering slowing interest rate increases. The announcement led Bitcoin to initially rise as high as nearly $20,800 after the central bank said it will “take into account cumulative tightening” and “lags with which monetary policy affects economic activity and inflation” when deciding on next rates. .

But Bitcoin reversed course as Powell delivered a more confusing message about the Fed’s plans: “We still have a ways to go,” and furthermore, the Fed chair said, “incoming data…suggests that the final level of interest rates will be higher. than previously expected.”

Bitcoin dipped below the $20,200 level according to Wednesday afternoon commentary after nearly hitting $20,800 before the Fed rate hike. The world’s largest cryptocurrency is still above about $19,300 on Monday past. Meanwhile, Ethereum is below $1,520 after dipping below $1,634 over the weekend. ETH is still well above its $1,340 level at the beginning of last week.

Cryptocurrencies exhibited the same price movement seen in the stock market. The Dow Jones Industrial Average and the S&P 500 fell 1.5% and 2.4% on Wednesday, respectively. And this reminded crypto traders that the correlation with equities is still intact, as the central bank is the one pulling the strings. The current environment of high inflation and rising interest rates has curbed demand for risky assets.

The flagship cryptocurrency looks vulnerable to falling below the $20,000 level and back into the $19,000 to $20,000 range, where it has been trading for most of the past two months.

Edward Moya, an analyst at broker Oanda, commented on the market development: “The Fed’s initial reaction was quite strong for most risk assets, but it did not hold as the central bank will continue to rely on the next round of inflation data.

Michael Safai, a partner at trading firm Dexterity Capital, also said: “The devil was not in the data but in the language. All eyes will turn to next week’s US Real CPI.” [of U.S. inflation]. If the data is not as hopeful as the Fed’s ambitions, crypto investors could back off once again.”

The next FOMC meeting of the US Federal Reserve is scheduled for December 14-15, when market participants will assess whether Powell intends to slow down with the pace of rate increases.

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