Bitcoin staged a sharp rally on May 4, 2022, briefly reclaiming the $40,000 mark after the Federal Reserve delivered the most aggressive interest rate increase in over twenty years — and markets breathed a collective sigh of relief that it wasn’t worse.
TL;DR
- The Federal Reserve raised its benchmark interest rate by 50 basis points to a target range of 0.75%–1.00%
- Bitcoin surged approximately 5–6%, briefly crossing $40,000
- Fed Chair Jerome Powell explicitly ruled out 75 basis point rate hikes in the near term
- Ethereum and major altcoins joined the rally, with ETH approaching $2,960
- The market reaction followed a classic “sell the rumor, buy the news” pattern
The Fed’s Big Move
The Federal Open Market Committee concluded its two-day meeting on May 4 with a widely expected 50 basis point rate hike — the largest single increase since 2000. The move brought the federal funds rate to a target range of 0.75%–1.00%, as the central bank intensified its fight against inflation running at the fastest pace in four decades.
Heading into the announcement, the market had largely priced in the half-point increase. According to futures data, traders assigned a 63.9% probability to a 50 basis point hike, with only a 36.1% chance of a more modest 25 basis point move. The expectation was clear — the Fed needed to act aggressively, and it did.
Powell’s Reassurance Ignites the Rally
What truly sent markets racing higher wasn’t the rate hike itself, but what Fed Chair Jerome Powell said during the post-meeting press conference. Powell explicitly stated that the central bank was “not actively considering” 75 basis point hikes, effectively calming fears of even more draconian tightening measures in the months ahead.
Bitcoin, which had been languishing around $37,600–$38,000 before the announcement, exploded higher. The world’s largest cryptocurrency surged roughly 5–6% within hours, briefly piercing the psychologically important $40,000 level. At its peak on the day, Bitcoin traded at approximately $39,860 according to Reuters data, with CoinMarketCap recording a daily close near $39,698.
Ethereum and Altcoins Join the Party
The rally wasn’t confined to Bitcoin. Ethereum, the second-largest cryptocurrency by market capitalization, also posted strong gains, rising to approximately $2,940–$2,960 during the session. Yahoo Finance data showed ETH reaching an intraday high of $2,956 on May 4.
Major altcoins including Cardano (ADA), Avalanche (AVAX), and Solana (SOL) led the broader market higher, with several posting percentage gains that outpaced Bitcoin’s. The correlation between crypto and equities remained tight — the Nasdaq and S&P 500 also rallied on Powell’s comments, reinforcing the narrative that cryptocurrencies were trading like risk-on tech assets.
A Classic Pattern Plays Out
The price action fit a familiar playbook: markets sold off in the days leading up to the Fed decision as uncertainty weighed on sentiment, then rallied once the news was digested and the worst-case scenario was removed from the table. It was textbook “sell the rumor, buy the news” behavior that crypto traders have seen repeatedly during macro-driven selloffs.
Bitcoin had been under pressure throughout April 2022, shedding significant ground from its November 2021 all-time high near $69,000. The Fed’s aggressive pivot toward monetary tightening had been a major headwind, and each rate decision became a high-stakes event for digital asset prices.
Why This Matters
The May 4 rally demonstrated something crucial about the crypto market’s relationship with macroeconomic policy: it’s not just what the Fed does, but what it signals about the future. By ruling out 75 basis point hikes, Powell removed the tail-risk scenario that had been haunting risk assets. For Bitcoin, which was still searching for a definitive bottom after months of decline, the Fed’s relatively dovish tone within a hawkish decision provided a short-term lifeline — though the broader bear market would soon prove it was only a temporary reprieve. Within days, the Terra ecosystem collapse would send shockwaves through the entire crypto market, making this Fed-driven rally a brief moment of optimism before the storm.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always do your own research before making investment decisions.
Powell explicitly ruling out 75bp hikes was the dovish signal that sent BTC back above $40K. Classic sell the rumor buy the news on the 50bp that was already priced in.
Biggest rate hike in two decades and BTC goes UP 5%. That was the moment I realized macro correlation was not as straightforward as people thought.
The relief rally lasted exactly one week. By May 9 UST was depegging and that $40K level became a distant memory by June.
one week later UST depegged and the entire may rally got wiped. anyone who longed the powell pivot got annihilated
the timing was brutal. one week you are celebrating $40k BTC and the next UST is in a death spiral. may 2022 was the month that broke crypto
the correlation flipped multiple times in 2022. btc rallied on hawkish fed news and dumped on dovish. anyone trading macro correlations that year got chopped up
ETH touching $2,960 on the same day showed risk appetite was back temporarily. Of course it all crashed a week later when Terra imploded.
ETH at $2,960 feeling like a victory. five days later it was $1,700. may 2022 was relentlessly brutal
classic powell put. promise not to hike faster, market pumps 6%, everyone forgets inflation is still at 8.5%. good times
inflation at 8.5% and BTC pumps because powell promised not to hike faster. peak clown market logic
cpi_truth inflation at 8.5% and markets pumped because the fed promised to destroy demand slightly slower. peak forward-looking absurdity
50bp was fully priced in at that point. the real catalyst was powell saying 75bp was off the table. markets rally when worst case scenarios get removed
powell saying 75bp was off the table was the green light. shorts got squeezed the moment worst case came off
powell said 75bp was off the table and the market pumped 6% on a 50bp hike. you cant script this stuff. pure algo momentum
longed the powell pivot at 40k with 5x. UST blew up 6 days later and i got margin called at 31k. expensive lesson in rallying on hawkish news
the 50bp was already priced in but the market still pumped 6%. classic short squeeze disguised as fundamental analysis