Three Central Banks Raise Rates Together for First Time Since 2006, Bitcoin Faces Macro Risk

For the first time since 2006, three central banks - the European Central Bank, Federal Reserve, and Bank of Japan - are set to raise interest rates simultaneously. This combination has historically been a major macro risk for financial assets.

The last time this happened in 2006, risk assets bought with borrowed money were among the first to break. The European Central Bank already raised its deposit rate to 2.50% on September 10, while futures markets predict an 86.5% chance of a hike from the Federal Reserve on Wednesday.

Historically, when borrowing costs rise, investors tend to sell off their riskiest bets first. In 2006, this led to significant losses for assets such as the S&P 500, Europe's Euro Stoxx, and Japan's TOPIX, with emerging markets falling more than 20%.

Bitcoin (BTC) did not exist in 2006 but has faced a similar squeeze in August 2024 when the Bank of Japan raised rates. On that occasion, Bitcoin fell as much as 20%. However, this time around, despite the yen climbing 3.7% in three sessions, Bitcoin held above $79,000.

One key factor that may cushion impacts from the rate decisions is the influx of money into US spot Bitcoin ETFs, which took in $3.52 billion in August and could provide a daily fund flow to support Bitcoin's price.