Cryptocurrencies Could Fall Again With Recent European Central Bank Decisions

Cryptocurrencies Could Fall Again With Recent European Central Bank Decisions

The fight against inflation is winning new episodes around the world, especially in the eurozone, where its fiat currency recently plunged below the dollar for the first time in decades. These decisions to control inflation can have a negative effect on cryptocurrencies.

The European Central Bank announced a further rate hike in the largest shift in the region’s history, raising interest rates by 75 basis points.

As Steve Liesman said during CNBC’s Squawk Box, the ECB joined the ’75 club’ along with other countries following similar policies to try to control the financial situation of their economies.

Liesman also spoke about some of the problems associated with the economy of the place, such as the energy crisis, the lack of natural gas from Russia and that the government could eventually subsidize gas for the population, which could also have an inflationary reaction in the future.

Earlier this year, from early May to mid-June, the US Federal Reserve took similar steps by raising interest rates by half a percentage point and again by 75 basis points. These were the largest increases in periods of more than 2 decades.

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The ECB just took the same medication that the Fed took in the first half of 2022. Since then, Bitcoin has struggled to recover its value and does not stay above $20,000.

It is not certain that this is exactly the reason for the length of the down period, but it is seen by experts as a strong barrier for Bitcoin to profit.

Concerns about inflation and the general difficulty of balancing accounts at these times are driving investors away from riskier assets and even stocks.

Since early 2022, both stocks and cryptocurrencies have been “running together” showing a correlation between the two sectors (which is not favorable for Bitcoin).

In the past, whenever the Fed made similar decisions, Bitcoin felt a decline, in the second Fed rate adjustment in June, Bitcoin fell from $22,500 to $17,700.

As you can imagine, the correlation between Bitcoin and government decisions leaves many wondering if the cryptocurrency is really fulfilling its purpose of being a way to get rid of government decisions.

Source: Live Coins

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