European Central Bank Becomes More Hawkish, Will Crypto Crash

Nidhish Shanker
October 19, 2022
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5 Negative Trends In EU Capital Market, Can Crypto Save The EU?

The crypto market is displaying bearish sentiments due to unfavorable market conditions. However, it does not appear that the macroeconomic outlook will get better anytime soon. The US Federal Reserve will almost certainly raise the interest rates again. Now, according to Reuters, the European Central Bank will follow a very similar path. The hawkish stance can result in a crypto crash.

Despite the growing concerns about global financial stability, the European Central Bank will raise interest rates by another 75 bps. The decision on the next hike will be taken on the 27th of October.

The European Central Bank’s hawkish commitment will negatively affect the crypto market.

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How The Central Banks Impact Crypto Market

The central banks are responsible for protecting the economy from abnormal economic phenomena such as inflation and recession. The banks engage in quantitative tightening and interest rate hikes. The latest Consumer Price Index highlighted worse-than-expected inflation levels. The bad data make the Fed even more hawkish to achieve its target.

Both the Fed and the European Central Bank want to bring the inflation level down to 2%. The current inflation level in the Euro Zone is 10% while in the US, it is at 8.2%. According to lawmakers, the high inflation is a result of the Covid pandemic, government spending during the pandemic, and the Russia-Ukraine war.

To achieve just that, the Fed will increase its interest rates by 75 bps for the fifth consecutive time. Meanwhile, ECB will also follow in the Fed’s footsteps.

The crypto market is hoping that the concerns about financial stability can temper the aggressive central banks. The World Bank claims that the global economy will face a recession in 2023. Meanwhile, Elon Musk of Tesla and Cathie Wood of Ark believes that the economy will see deflation.

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Will Crypto Crash

The negative impact of the market will definitely put negative pressure on the market. However, Bank of America believes that a strong equity rally will happen in early 2023. It is also likely that the market will already price in a 75 bps hike.

 

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Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.

Why Trust CoinGape

CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights Read more…to our readers. Our journal analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.

About Author
About Author
Nidhish is a technology enthusiast, whose aim is to find elegant technical solutions to solve some of society's biggest issues. He is a firm believer of decentralization and wants to work on the mainstream adoption of Blockchain.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.