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ECB Cuts Interest Rates: A Potential Boost for Bitcoin Amid Fed Speculation

The ECB’s rate cut marks a significant moment in global monetary policy, potentially setting the stage for a positive shift in the crypto market.


The ECB’s rate cut marks a significant moment in global monetary policy, potentially setting the stage for a positive shift in the crypto market.
Credit: Foretoken Media 2024

FRANKFURT, DE – The European Central Bank has made a significant move by lowering its three key interest rates by 25 basis points each on Thursday. This action has crypto enthusiasts anticipating a potential boost to Bitcoin's price, especially with speculation that the Federal Reserve might follow suit.


ECB Cuts Interest Rates


The ECB's new rate for its main refinancing operations is now 4.25%. Meanwhile, the interest rate cuts for its marginal lending facility and deposit facility are 4.5% and 3.75%, respectively. This marks the central bank’s first rate cut in nearly five years.


“Since the Governing Council meeting in September 2023, inflation has fallen by more than 2.5 percentage points and the inflation outlook has improved markedly,” stated the ECB in a Thursday press release. “It is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady.”


Global Central Bank Pivot in Progress


The ECB’s interest rate cuts decision indicates a global central bank pivot is well underway, following a period where monetary authorities worldwide raised rates to combat surging inflation during the Covid-19 pandemic. The Swiss Central Bank announced its first 25 basis point cut in March, while the Bank of Canada confirmed its first cut in four years on Wednesday.


The pressing question now is whether the United States Federal Reserve will follow suit. A similar move could be bullish for stocks and crypto alike, which historically perform well during periods of cheap borrowing and money supply growth.


Market Expectations and Bitcoin's Potential


According to CME FedWatch, the consensus is that rate cuts will arrive later this year—possibly in September, and almost certainly by November. However, June is considered a near-certain write-off. The Federal Reserve stated its position in May.


“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

Interest rate cuts are historically positive for Bitcoin and other leading cryptocurrencies. Some analysts attribute BTC's recent price uptick to bets that the Fed and others will indeed lower rates. Despite this, prominent BitMEX co-founder Arthur Hayes has suggested that money supply growth—and consequently, new highs for Bitcoin—will occur regardless of whether the Fed cuts rates.

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