, ethereum and other major cryptocurrencies have rocketed higher in the first month of 2023, adding $250 billion to the combined crypto market and topping a surprise Goldman Sachs chart.

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The bitcoin price surged to around $23,000 per bitcoin, up from under $17,000 at the beginning of the year. EthereumETH
and other top ten cryptocurrencies have seen similar gains—though some smaller coins have soared even higher.

Now, the $1 trillion crypto market is braced for the latest Federal Reserve interest rate decision tomorrow that’s expected to see the Fed lift its funds rate to a new target range of 4.5% to 4.75%—its smallest hike since it began raising rates in March last year.

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Markets are “buckling under the pressure of the Federal Reserve’s upcoming rate rise,” Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said in emailed comments.

The bitcoin price has fallen back from the six-month high it reached last weekend, mirrored by ethereum and other major cryptocurrencies.

“Policymakers are largely expected to increase rates by 25 basis points, and this is what the market has priced in,” Lund-Yates said. “As the decision draws closer, there are inevitability some small tremors creeping in, but these shouldn’t be protracted.”

Rising expectations the Federal Reserve could be pivoting from its policy of rapid interest rate hikes have powered a crypto and stock market rally through January after economic data showed red-hot inflation was beginning to cool. The Fed’s series of interest hikes last year was designed to drive down inflation by sucking liquidity out of the system.

“The market may have gotten ahead of itself for the Fed’s liking,” Nauman Sheikh, head of treasury management at crypto asset manager Wave Financial, said in an emailed note.

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Following the interest rate decision tomorrow at 1pm ET, Federal Reserve chair Jerome Powell will hold a press conference in which he’s expected to reiterate his hawkish position.

“The Fed has already laid out its ‘higher for longer’ road map whereby the interest rate hikes would transition from fast-paced to a more measured pace and then remain anchored to the terminal rate for some time,” Sheikh said.

“The market, now focused on recession, doesn’t believe the Fed and is pricing in rate cuts starting in September. There is a strong possibility that in the press conference, Powell will be more hawkish and re-tighten financial conditions. For that reason, we could see a healthy short-term correction in crypto, and all risk assets.”

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