ECB’s 25 bps Interest Rate Hike Sparks Rally in Bitcoin and Ethereum Prices as Expected

On May 4th, the European Central Bank (ECB) increased its primary interest rates by 25 basis points, indicating a slower rate of policy tightening. In April, the inflation rate in the Eurozone rose to 7%, with the core rate remaining near an all-time high at 5.6%.

Following the 25 basis point interest rate hike by the U.S. Federal Reserve, the crypto market responded positively to the ECB’s move. Bitcoin’s price is currently over $29,000, while Ethereum’s price has surpassed $1,900. It’s expected that traders will take bullish positions after central banks signal that there will be no aggressive interest rate hikes.

European Central Bank (ECB) Increases Interest Rates by 25 Basis Points

The Governing Council of the European Central Bank has decided to increase the interest rates on the main refinancing operations, the marginal lending facility, and the deposit facility to 3.75%, 4.00%, and 3.25%, respectively.

The ECB’s objective is to bring policy rates close to the 2% target amidst high levels of inflation, and the central bank intends to maintain low levels for as long as necessary. Furthermore, the Governing Council will gradually reduce the Eurosystem’s asset purchase program (APP) portfolio and discontinue reinvestments under the APP starting from July 2023.

Following the ECB’s decision to raise interest rates, stock market indexes experienced a decline, and the Euro dropped slightly against the US dollar. The DXY index also saw a sharp increase from 101.1 to 101.6, indicating some pressure on the crypto market. Nevertheless, the overall outlook remains positive, and Bitcoin is expected to surpass $30,000.

ECB President Christine Lagarde stated that the central bank will continue to work towards decreasing inflation and will continue to rely on data to determine the appropriate level and duration of the restrictions.

Bitcoin and Ethereum Price Reaction

Following the ECB’s decision to increase interest rates, the price of BTC has risen significantly. At present, it is trading at $29,093, up by more than 3% in the last 24 hours. Traders and investors are eagerly anticipating upward momentum to drive the BTC price above $30,000 once more, particularly as the US banking crisis appears to be just beginning, with PacWest Bancorp expected to be the next bank to fail.

Ethereum’s price is currently above $1,900, having risen by almost 3% in the last 24 hours. Other altcoins, such as Cardano (ADA) and Solana (SOL), are also displaying strength.

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