Yesterday, Bitcoin entered the Federal Reserve meeting with investors largely expecting a 25-basis-point rate hike. The market questioned whether Chair Kevin Warsh would signal that tighter policy was temporary or the start of a longer period of higher rates. The Fed delivered the expected increase, lifting its benchmark rate to 3.75% to 4%, while leaving room for another hike. Warsh said he was not prepared to prejudge future decisions.
Today, the initial market reaction has started to reverse, the US stock futures rose on Thursday after Wall Street sold off following the Federal Reserve’s first interest rate increase since 2023. S&P 500 futures were up about 0.8%, Nasdaq 100 futures gained roughly 0.9% and Dow futures rose around 0.7% in early trading. The rebound came after the Dow fell 631 points on Wednesday, while the S&P 500 lost 0.4% and the Nasdaq slipped slightly.
The Fed raised its benchmark rate by 25 basis points to 3.75% to 4% and signalled that another increase could come before the end of 2026. The decision came as inflation remains above the Fed’s 2% target, with the conflict involving Iran adding another problem through higher energy prices. Oil traded above $100 a barrel this week before falling on Thursday as Saudi Arabia offered additional crude supplies.
US stock futures climbed on Thursday as falling oil prices eased concerns over supply disruptions and inflation.
Dow futures, S&P 500 futures, and Nasdaq 100 futures all gained around 0.8%-1%. The rebound came after reports that Saudi Arabia could restore pipeline capacity soon.…
— FxGecko (@FxGecko_Global) September 17, 2026
Iran has made the Fed’s inflation problem harder
Higher oil prices raise transportation, electricity and production costs, making it harder for inflation to fall even if consumer demand slows.
That puts the Fed in an awkward position, as raising rates can weaken demand, but it cannot produce more oil or repair disrupted supply chains. Reuters reported this week that oil was above $105 a barrel as Middle East tensions pushed energy prices higher, while Treasury yields also climbed.
The market’s reaction shows why investors are watching oil almost as closely as the Fed itself. On Wednesday, the 10-year Treasury yield briefly moved above 5%, while the two-year yield reached its highest level since July 2024. On Thursday, falling oil prices helped yields retreat and gave stocks some room to recover.
President Donald Trump has meanwhile been calling for much lower rates, arguing that the Fed should cut rather than tighten policy. His comments put the central bank’s independence back into focus, while Fed Chair Kevin Warsh has defended the decision as necessary to deal with persistent inflation.
What are investors saying about the Fed hike?
The market reaction has been mixed. Franklin pointed out that the Fed’s rate increase triggered a 600-plus-point drop in the Dow, but stock futures turned higher the following morning.
The Fed hiked rates yesterday, its first hike in three years, and stocks sold off. The Dow dropped 600+ points.
Everyone was preparing for another red day today. But futures are green this morning.
Looks like the market already got most of the panic out of its system. pic.twitter.com/FMAlZsxcZs
— Franklin407 (@wealthyfranklin) September 17, 2026
Wired made a similar observation, noting that markets sold off after the quarter-point hike before recovering overnight, even though another hike remains possible this year.
Ant focused on a different part of the picture. He argued that the rate increase does not tell the whole story because the Fed’s balance sheet has started rising again while M2 has reached a record above $23 trillion.
The Fed hiked rates yesterday. But look closer — two things are moving in opposite directions.
What the data shows:
• QT is over. The Fed’s balance sheet turned back up to ~$6.7T (WALCL)
• M2 money supply hit a record $23T+, still growing 5.6% YoY (M2SL)
• Rates: UP.… pic.twitter.com/cmc643Ji0K— KoreAnt (@KoreAnt_YK) September 17, 2026
His point is that interest rates are moving higher while the amount of money in the system is still growing, creating a more complicated backdrop for stocks and other risk assets
That distinction also matters for crypto. Bitcoin and other cryptocurrencies tend to react strongly to changes in liquidity and interest-rate expectations, so investors are watching both the cost of money and how much liquidity remains in the financial system. The market’s quick recovery in futures suggests some investors may have already absorbed the initial shock from the Fed decision. Still, the next test could come from the 10-year Treasury yield and whether the Fed follows through with another hike.
Bitcoin is facing the same higher-rate problem
The Fed decision is also being felt in crypto because Bitcoin and other digital assets have become closely tied to broader risk appetite. Bitcoin was trading around $76,000 on Thursday after falling below $76,000 ahead of the Fed meeting. It had been above $82,000 earlier in September.
Bitcoin has recovered some ground after the decision, even as the market remains cautious. But higher interest rates make cash and government bonds more attractive than assets that do not generate income. In contrast, higher Treasury yields can reduce how much investors are willing to pay for riskier assets.
Crypto has also recently reminded everyone how quickly it can react to tighter financial conditions. In February, Bitcoin plunged to about $63,000 as a technology sell-off and expectations around Warsh’s appointment as Fed chair hit risk assets. Reuters reported that the global crypto market lost about $2 trillion from its October peak during that downturn.
This time, the starting point is different. Bitcoin is still above $76,000, and Thursday’s stock-futures rebound shows that investors are already looking past the initial shock. But with the Iran conflict keeping oil prices elevated and the Fed leaving the door open to another hike, markets are now facing a combination they largely moved away from in recent years.
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