Bitcoin, stocks eye recovery after ECB news jolts markets

• Bitcoin retested the $25,000 area, while S&P 500 had gained about 1% after plunging on ECB interest rate hike news.
• The ECB on Thursday surprised with a 50 basis point rate hike.
• Reports that JPMorgan and Morgan Stanley are looking to help First Republic Bank buoyed stocks.

Bitcoin and stocks have recovered slightly after trading lower as investors reacted to the latest monetary policy news from the European Central Bank (ECB.)

On Thursday, markets were digesting recent events around US banks and the possible ramifications to the Federal Reserve’s next move on its rate hikes when the ECB announced a surprise 50 basis points interest rate hike. Stocks reacted lower and so did the crypto market, with crypto analyst Michael van de Poppe suggesting the Fed could follow suit at its meeting next week. 

Breaking:

ECB raises interest rates by 50bps.

This gives a signal that there’s no pivot on the horizon and that Powell most likely continues his policy by raising 25bps/50bps next week.

Markets are correcting.

— Michaël van de Poppe (@CryptoMichNL) March 16, 2023

S&P 500, Bitcoin recover after ECB news

The S&P 500 staged a slight recovery, thanks to the resurgence of regional bank shares.

Despite trading down 0.7% at one point, the benchmark index was up 1% at 12:20 pm ET, while the Dow Jones Industrial Average that had initially plunged by more than 300 points, reversed and was hugging gains with just over 100 points, or 0.3% higher. Elsewhere, the Nasdaq Composite was up by 1.5%.

While US stocks have rebounded higher amid reports that banking giants JPMorgan and Morgan Stanley were coming to the aid of embattled lender First Republic Bank, concerns remain and investors continue to be cautious. 

Bitcoin toyed with resistance around $25,000 on Thursday as cryptocurrencies continued to track events around the stock market.

The flagship cryptocurrency, which traded lower earlier in the day amid the highlighted broader market downswing, showed it’s still highly correlated to equities despite last week’s spike that had some observers suggesting a rising decorrelation.

Indeed, as CoinJournal analyst Dan Ashmore argues in our deep dive published today, Bitcoin could eventually decouple from other risk assets. However, that’s an outlook that mostly doesn’t apply to the current trading scenario, with the two assets largely in lockstep.