How Do Cryptocurrencies Price Economic News?
T. Niklas Kroner, Idrees S. Mohammed, Clara Vega (Federal Reserve Board) - 03/2026
- Cryptocurrency markets exhibit sharp and near-instantaneous reactions to U.S. macroeconomic announcements, with volatility, trading volume, and bid-ask spreads rising significantly around FOMC, CPI, and NFP releases.
- These market reactions persist for up to 30 minutes post-announcement, indicating that cryptocurrency investors actively monitor and quickly incorporate economic news into prices.
- Announcement surprises associated with higher yields or "risk-off" conditions lead to substantial declines in Bitcoin and Ethereum prices, suggesting a strengthening transmission of U.S. monetary policy to the real economy.
- The price reaction patterns of cryptocurrencies to economic news more closely resemble those of U.S. equities than fiat currencies or commodities, classifying them primarily as risk-sensitive assets.
- Ethereum's price reactions to macroeconomic news are typically larger in magnitude compared to Bitcoin's.
- The market sensitivity of cryptocurrencies to economic news has significantly increased since 2021, coinciding with greater institutional participation.
- Price impact estimates of order flow around announcements are consistent with rising institutional participation, indicating their crucial role in price discovery.
- On exchanges like Binance and OKX, order flow has become more informative around announcements post-2021, suggesting increased information asymmetry due to institutional investors' superior processing capabilities.
- Coinbase, in contrast, shows less evidence of informed trading activity, potentially indicating a stronger role for retail trading or a reliance on price discovery from other exchanges.
- Prior to 2020, cryptocurrency markets showed limited systematic reactions to macroeconomic announcements, with FOMC announcements exhibiting the strongest, albeit still modest, effects.
- From 2020 to 2023, both Bitcoin and Ethereum began to react systematically to announcements, with pronounced spikes in volatility and trading volume, which grew until 2022.
- Spikes in bid-ask spreads around announcements have diminished since 2023, suggesting improved market liquidity and more efficient price discovery.
- The response of cryptocurrencies to economic news, particularly NFP news, shows a sign flip around 2020, mirroring documented shifts in U.S. equity market reactions.
- Cryptocurrencies are found to be more sensitive to economic news than other asset classes like bonds, fiat currencies, gold, and oil.
- The time-varying analysis reveals that cryptocurrency price sensitivities to news evolve qualitatively similarly to U.S. equities, reinforcing their classification as risk-sensitive assets.
- Correlations between cryptocurrency and S&P 500 price sensitivities are highly positive, while correlations with fiat currencies and oil are strongly negative.
- The increased market sensitivity of cryptocurrencies to economic news post-2021 is linked to the entry of institutional investors, evidenced by narrative accounts and empirical proxies of institutional adoption.
- The price impact of trading on Binance and OKX has decreased post-2021, indicating a more liquid market, while trading has become more informative around announcements.
- On Coinbase, price impact estimates are mixed, with a negative impact pre-2021 suggesting contrarian retail trading, and near-zero impact post-2021 possibly due to offsetting institutional trades or price following.
- The findings suggest that cryptocurrencies may amplify the transmission of U.S. monetary policy to the real economy through wealth effects, given their higher propensity to consume out of crypto wealth compared to equity wealth.
- Technological differences between Bitcoin and Ethereum do not appear to be a first-order determinant of their price formation in response to economic news.
- Non-headline CPI and NFP surprises have a more significant impact on cryptocurrency prices than headline surprises.
- The Fed's non-yield monetary policy shock, which does not affect the yield curve, still leads to substantial price effects in cryptocurrencies.
- The cryptocurrency market's trading volume has surpassed that of major European equity and U.S. bond markets, with Bitcoin and Ethereum individually comparable to mid-sized fiat currencies.
- The study utilizes novel intraday data from CoinDesk covering over 90% of global cryptocurrency trading activity from 2015 to 2025.
- The analysis focuses on Bitcoin and Ethereum traded against USD on Coinbase and against USDT on Binance and OKX.
- Bid-ask spreads are substantially larger on Coinbase compared to Binance and OKX, likely due to regulatory compliance costs and competitive fee structures.
- The FOMC press conference significantly impacts markets, though its peak effect is smaller than the initial statement release, suggesting more continuous information dissemination.
- The study's findings contrast with prior work that suggested a disconnect between macroeconomic conditions and cryptocurrency prices, attributing this difference to the use of novel, granular intraday data and a longer sample period.
- The increased market sensitivity of cryptocurrencies to economic news post-2021 aligns with increased institutional trading activity, which is crucial for price discovery in traditional markets.
- The research contributes to understanding the transmission channels of U.S. monetary policy and the role of cryptocurrencies as risk-sensitive assets rather than safe-haven or inflation hedges.