Federal Reserve Rate Decisions, Risk Sentiment, and Cryptocurrency Returns: Evidence from FOMC Event Windows

This study examines whether major cryptocurrency returns respond systematically to scheduled Federal Reserve (Fed) interest rate announcements and whether FOMC-window movements are explained more by realised policy decisions or by broader risk-sentiment conditions. Using daily data for Bitcoin, Ethereum, XRP, Dogecoin, Solana, the U.S. Dollar Index, and VIX, the analysis covers 43 scheduled FOMC announcements between 2021 and 2026. Six cumulative event-window returns are evaluated through parametric mean tests, Wilcoxon signed-rank tests, and panel event-study regressions with crypto fixed effects and FOMC-event-clustered standard errors. Because the available surprise measure contains only two nonzero observations, the study focuses on realised rate changes, hike/cut/hold categories, asymmetric rate-change magnitudes, VIX changes, and DXY returns rather than formal monetary policy shocks. The results provide little evidence that cryptocurrency returns differ systematically from zero around FOMC announcements. Actual rate changes, policy-direction categories, and asymmetric hike/cut magnitudes do not robustly explain event-window returns, and crypto-specific interaction models provide no stable evidence of heterogeneous sensitivity across assets. By contrast, VIX changes are negatively and significantly associated with cryptocurrency returns in several windows, while DXY effects are weak and unstable. The study contributes by showing that FOMC-window cryptocurrency performance is better explained by risk-sentiment conditions than by the realised size or direction of Fed rate decisions.