• The European Central Bank (ECB) surprised markets with a 50 basis point rate hike on Thursday.
• US stocks reacted lower but eventually recovered, buoyed by reports of JPMorgan and Morgan Stanley helping First Republic Bank.
• Bitcoin retested the $25,000 area as cryptocurrencies followed the stock market’s movements.

ECB Rate Hike Jolts Markets

The European Central Bank (ECB) shocked investors Thursday when it announced an unexpected 50 basis point rate hike. This caught markets off guard and US stocks initially dropped significantly in response.

Reactions to ECB News

The S&P 500 tumbled 0.7%, while the Dow Jones Industrial Average plunged over 300 points. However, stocks began to recover amid reports that banking giants JPMorgan and Morgan Stanley were coming to the aid of First Republic Bank, leading to a 1% increase in the S&P 500 index at 12:20 pm ET, while the Dow Jones was up 0.3%. The Nasdaq Composite rose by 1.5%.

Impact on Crypto Market

The crypto market also saw a reaction to the ECB news, with Bitcoin testing resistance around $25,000 despite trading lower earlier in the day due to broader market turbulence. Despite last week’s spike which had some observers believing that Bitcoin was becoming less correlated to equities, it is still highly tied to events surrounding traditional markets such as this one from the ECB.

Possible Fed Reaction

Crypto analyst Michael van de Poppe suggested that if the ECB continued its policy next week then it could lead to a similar move from Federal Reserve Chairman Jerome Powell who may raise interest rates by 25-50 basis points at its upcoming meeting next week.

Conclusion

Bitcoin and stocks have seen some recovery after being affected by news of an unexpected rate hike from the European Central Bank (ECB). Although US stocks have rebounded due to reports of help from banking giants JPMorgan and Morgan Stanley for troubled lender First Republic Bank, investors remain cautious about potential further action from both central banks going forward which could have an impact on both bitcoin and stocks alike.