Central Banks Unite: ECB, Fed, and BoJ Raise Rates, Threatening Bitcoin Macro Risk

Three central banks - the European Central Bank (ECB), the Federal Reserve, and the Bank of Japan - are set to raise interest rates for the first time since 2006. The ECB has already made its move, increasing its deposit rate to 2.50%. The market is now pricing in a near-90% chance of a hike from the Fed on Wednesday.

The last time this happened in 2006, risk assets took a hit. The European Central Bank's Governing Council said that inflation pressures continue to rise due to ongoing conflicts in the Middle East and that inflation will remain above target for an extended period.

Between May 10 and June 12, 2006, the S&P 500 fell by 7.7%, while Europe's Euro Stoxx plummeted 13.3% and Japan's TOPIX index dropped 16.5%. Emerging markets fared even worse, with losses exceeding 20%.

Bitcoin (BTC) did not exist in 2006 but has since faced similar challenges. In August 2024, the Bank of Japan raised rates, causing the yen to surge and Bitcoin to fall as much as 20%