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.
classic sell the rumor buy the news Powell ruling out 75bps was the green light risk assets needed
lol remember when everyone thought $40k was the floor 3 days later terra imploded and btc was in freefall good times
ETH at $2960 seems like a dream now the correlation with nasdaq was so tight back then crypto basically traded like leveraged tech
5% rally on a 50bps hike seems counterintuitive until you realize markets were pricing in something worse. The relief rally was inevitable once Powell showed restraint.
Powell’s forward guidance was the real catalyst not the hike itself removing tail risk is what gets markets moving every single time