Bitcoin Holds Steady as BOE Hikes Interest Rate, ECB to Reduce Crisis-Era Stimulus

Bitcoin was trading little changed after the Bank of England delivered a surprise interest rate hike and the European Central Bank (ECB) announced an end to the crisis-era asset purchase program.

The largest cryptocurrency by market value is changing hands near $48,700 at press time, representing a marginal loss on the day.
The BOE’s Monetary Policy Committee voted 8-1 to increase the bank rate to 0.25% and by 9-0 to maintain the amount of quantitative easing at £895 billion ($1.2 trillion).
The central bank was expected to keep the rate unchanged at a record low of 0.10%.
The surprise increase challenges the narrative that central banks prefer to raise interest rates only after the end of quantitative easing or asset-purchase programs.
While the European Central Bank (ECB) kept key policy tools unchanged, it announced an end of net asset buying under the Pandemic Emergency Purchase Programme (PEPP) in March 2022.
However, the 17-nation central bank did a balancing act by committing to boost an older asset-purchase program to €40 billion ($45 billion) in the second quarter of 2022 from €30 billion (34 billion) in the first
Bitcoin is staying resilient, perhaps tracking signs of risk reset in traditional markets.
The Australian dollar/yen currency pair is trading 0.6% higher on the day, extending Wednesday’s 1.18% gain and hinting at continued adoption of riskier assets following the U.S. Federal Reserve’s hawkish policy statement.
Futures tied to the S&P 500 added 0.6% alongside gains in other growth-sensitive assets like industrial metals.
On Wednesday, the Fed signaled three rate hikes in 2022, compared with market expectations for two, and doubled the pace of tapering, a reduction in bond buying, to $30 billion a month.
The immediate focus now is on the European Central Bank (ECB) rate decision due at about 12:45 UTC.
The ECB is expected to do the balancing act by announcing an end of the crisis phase while keeping the doors open for adjustments in both downside and upside scenarios.
As such, traditional markets are likely to extend their risk-on stance, which may end up putting a bid under bitcoin – all the more so as there are signs of large traders accumulating the cryptocurrency on the dip.
“Despite bitcoin’s recent 39% correction, the number of addresses with a non-zero balance continues to break all-time highs,” said Marcus Sotiriou, an analyst at the U.K. based digital asset broker GlobalBlock. “Also, since the $69,000 all-time-high, the Canadian Bitcoin Purpose ETF has added 6,341 BTC in assets under management, representing a 26.2% increase in coin holdings.”
“This suggests institutional interest is prevalent at these prices and that whales are buying up bitcoin supply during this correction,” Sotiriou added.

UPDATE (Dec. 16, 13:10 UTC): Adds ECB decision.

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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.

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