Markets Wipe Out Gains While BoE Raises Rates, ECB Promises Generous Support, & BoJ Maintains its Ultra-loose Policy

Bitcoin, crypto, and the stock market have wiped out the gains made on Wednesday after the Federal Reserve announced that it is doubling the pace of its bond-buying tapering and projects three rate hikes in 2022, which has been in line with market expectations.

S&P 500 recorded a 1.69% drop while tech-heavy Nasdaq fell 3.28%. The US dollar also remains under pressure, trading under 96.

Like Stocks, Bitcoin went back to $46,675 and Ether to nearly $3,800. As of writing, Bitcoin is trading just above $47k while Ether is struggling to get back to $3,900.

Unlike risk assets, gold managed to rise to nearly $1,810 per ounce, an increase of 3.25% since yesterday.

The US government and the Fed have been pumping trillions of dollars into the economy for the last two years during the Covid-19 pandemic through monetary and fiscal policy stimulus. And that money flowed into risky assets including crypto but now as the Fed has begun tapering, risk-on sentiments have taken a dip as we near the end of the year.

“Stocks do not necessarily determine the direction of crypto assets, but negative broader risk sentiment is definitively a headwind for crypto. Thinking an upwards choppy market is now more likely than a strong rally into xmas,” commented trader and economist Alex Kruger.

On Thursday, the Bank of England became the world’s first major central bank to raise interest rates. However, the nine-member Monetary Policy Committee (MPC) voted 8-1 to raise the Bank rate to 0.25% from 0.1%, which is likely to make loans and mortgages more costly.

BoE also warned that inflation was likely to hit 6% in April, 3x its target level.

“We're concerned about inflation in the medium term. And we're seeing things now that can threaten that. So that's why we have to act,” said Governor Andrew Bailey.

The central bank further pointed to the likelihood of more “modest tightening of monetary policy” over its three-year forecast period but could see inflation weaker or stronger than expected.

Because of Omicron, BoE has cut its growth forecasts for December and Q1 of 2022. It also expects Britain’s unemployment rate to fall to around 4% before the end of the year, lower than a 4.5% projection made last month.

While the MPC voted to keep the bond-buying program at its target size of $1.16 trillion, the same day, the European Central Bank cut back its stimulus but promised generous support for the economy next year.

The ECB said it will discontinue net asset purchases of private and public sector securities at March 2022 end — which it is but is open to resume again, “if necessary, to counter negative shocks related to the pandemic” — but is unlikely to not likely to raise key interest rates before October.

The Bank of Japan announced on Friday that while it will dial back emergency pandemic funding, it will maintain its ultra-loose policy. By keeping borrowing costs low, BoJ remains among the most dovish central banks due to inflation stuck well below their target.

“Japan's inflation is stuck around 0% and remains well below our 2% target. Achievement of our target will be some time off,” said BOJ Governor Haruhiko Kuroda. “That means it's important that we patiently maintain massive monetary stimulus.”

Get Daily Headlines

Enter Best Email to Get Trending Crypto News & Bitcoin Market Updates

What to Know More?

Join Our Telegram Group to Receive Live Updates on The Latest Blockchain & Crypto News From Your Favorite Projects

Join Our Telegram

Stay Up to Date!

Join us on Twitter to Get The Latest Trading Signals, Blockchain News, and Daily Communication with Crypto Users!

Join Our Twitter

Add comment

E-mail is already registered on the site. Please use the Login form or enter another.

You entered an incorrect username or password

Sorry, you must be logged in to post a comment.
Bitcoin Exchange Guide