Federal Reserve Monetary Policy Changes and Short-Term Bitcoin Returns: An Event Study Analysis of FOMC Rate Actions

Bitcoin has evolved from a relatively independent crypto asset into a financial asset highly sensitive to global liquidity and risk appetite, with Federal Reserve policy announcements serving as an important information source for its short-term pricing. This paper investigates 26 Federal Open Market Committee rate change events spanning 2017 2024 and constructs 18 observable monetary policy surprises using 30-day federal funds futures. Adopting the market adjusted event study method, cumulative abnormal returns are calculated for the event day, one day and seven-day windows. Abnormal returns are further regressed on actual rate changes and policy surprises to test their explanatory power. The results indicate average abnormal returns across all events fail standard significance criteria. While rate hikes generate negative seven window average cumulative abnormal returns and rate cuts yield positive ones, subgroup evidence cannot support robust causal inference. This study highlights the importance of differentiating fully priced policy adjustments from unexpected policy news for interpreting Bitcoin's short term price reactions. Empirical findings support viewing Bitcoin as a liquidity sensitive high volatility risk asset and provide a benchmark for future high frequency shock based empirical research with expanded samples.

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Publication Details

Journal
Advances in Economics Management and Political Sciences
Published
2026-11-03
DOI
https://doi.org/10.54254/2754-1169/2026.38531
Primary Topic
Financial Markets and Investment Strategies
Type
article
Field-Weighted Citation Impact
0.00
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article

Federal Reserve Monetary Policy Changes and Short-Term Bitcoin Returns: An Event Study Analysis of FOMC Rate Actions

Zichen Yang
Advances in Economics Management and Political Sciences
Financial Markets and Investment Strategies
article

Federal Reserve Monetary Policy Changes and Short-Term Bitcoin Returns: An Event Study Analysis of FOMC Rate Actions

Zichen Yang
article en

Abstract

Bitcoin has evolved from a relatively independent crypto asset into a financial asset highly sensitive to global liquidity and risk appetite, with Federal Reserve policy announcements serving as an important information source for its short-term pricing. This paper investigates 26 Federal Open Market Committee rate change events spanning 2017 2024 and constructs 18 observable monetary policy surprises using 30-day federal funds futures. Adopting the market adjusted event study method, cumulative abnormal returns are calculated for the event day, one day and seven-day windows. Abnormal returns are further regressed on actual rate changes and policy surprises to test their explanatory power. The results indicate average abnormal returns across all events fail standard significance criteria. While rate hikes generate negative seven window average cumulative abnormal returns and rate cuts yield positive ones, subgroup evidence cannot support robust causal inference. This study highlights the importance of differentiating fully priced policy adjustments from unexpected policy news for interpreting Bitcoin's short term price reactions. Empirical findings support viewing Bitcoin as a liquidity sensitive high volatility risk asset and provide a benchmark for future high frequency shock based empirical research with expanded samples.

Advances in Economics Management and Political SciencesVol. 313(1)
University of Edinburgh (GB)
Openalex Percentile: Top 12%
Financial Markets and Investment Strategies
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