The Bitcoin community has been abuzz as the European Central Bank (ECB) officially lowered interest rates by 25 basis points.
With this move, the primary refinancing rate now stands at 2.9%, while the deposit and marginal lending facility rates are set at 2.75% and 3.15%, respectively.
During the January policy meeting, ECB President Christine Lagarde explained that the Eurozone’s ongoing economic challenges drove the decision to cut rates. She emphasized that while the economy remains weak in the near term, manufacturing continues to contract, although services show signs of growth.
Lagarde also highlighted that global trade tensions could impact recovery prospects, but if they do not escalate, exports could help stabilize the economy. Inflation will fluctuate around its current level, with the ECB maintaining its long-term target of 2%.
Notably, the ECB’s stance remains target=”_blank” rel=”noopener”>rate cuts have increased Bitcoin’s appeal as a hedge against monetary easing.
For example, during the 2020-2021 pandemic response, when the Federal Reserve slashed interest rates to near zero and implemented massive stimulus measures, Bitcoin’s price surged from $3,850 to $69,000.
Similarly, in September 2024, when the Fed announced a 50 basis point interest rate cut, Bitcoin was trading below $60K before the announcement. It surged to $62K on the day of the announcement. In the following weeks, Bitcoin set a new all-time high, reaching $100K by December.
Today, Bitcoin has surged past $105K following the Federal Reserve’s decision to maintain interest rates between 4.25% and 4.5%. Market participants viewed this as a dovish move that benefits the crypto market.
Now, the ECB is adding further momentum to the crypto uptrend with its notable rate cut.
“Markets were ready for this one. Watch how crypto reacts to more cheap money flowing through the system,” remarked X user Wampa in response to the news.
Crypto Market Reacts
The crypto market is already feeling the effects of the news. At press time, Bitcoin has posted a 4% gain, rallying to $106K, its highest price this week.
Other crypto assets are following Bitcoin’s lead, including Ethereum and XRP, which are also seeing notable gains.
Read the full article here
