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.