Shares of Coinbase (COIN) and Circle (CRCL) climbed on July 27, ahead of the Federal Reserve's two-day policy meeting that starts Tuesday. The gains come as traders price in a 33% chance of a 25-basis-point rate hike, according to CME FedWatch data. The rally in crypto-linked stocks mirrors a 1.69% rise in Nasdaq-100 futures, suggesting broader tech optimism is outweighing fears of a hawkish Fed.
Why stocks are moving
Coinbase and Circle both benefit from higher interest rates because they earn yield on stablecoin reserves and other cash holdings. A quarter-point hike would boost their net interest income. But the market's reaction isn't just about the Fed. Easing geopolitical tensions have also lifted risk appetite, pushing investors back into growth stocks and crypto assets.
The Fed's dilemma
The central bank faces a tricky choice. Inflation has cooled but remains above the 2% target. A hike would signal continued vigilance, but a pause could fuel speculation that the tightening cycle is over. The 33% probability of a hike reflects deep uncertainty. Markets are pricing in a roughly two-thirds chance of no move.
What comes next
The FOMC will announce its decision on July 29 at 2 p.m. ET. Investors will also watch for Chair Jerome Powell's press conference for clues on the path ahead. For Coinbase and Circle, the outcome could set the tone for the rest of the summer.
