Bitcoin (BTC) experienced a modest 2% increase on Thursday, buoyed by indications from the European Central Bank (ECB) suggesting that its recent interest rate hike might be the last in a series of ten consecutive increases.

In a Thursday announcement, the ECB conveyed its current assessment, stating, “Based on its current assessment, the Governing Council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target.” The central bank had raised three key ECB interest rates by 0.25%.

Following this hike, the central bank’s rate for its primary deposit facility has reached 4%, a significant increase from -0.5% in June 2022. Analysts had already expressed skepticism about the likelihood of another rate increase at the ECB’s September meeting, with market expectations of a hike standing at 63% on Thursday morning.

Despite this latest rate adjustment, it is important to note that the current interest rate level still falls short of inflation. The European Central Bank anticipates an average inflation rate of 5.6% in 2023, before moderating to 3.2% in 2024. These projections represent upward revisions compared to the ECB’s previous forecasts, primarily due to an elevated outlook for energy prices.

The ECB acknowledged that underlying price pressures remain elevated, even though certain indicators have started to show signs of easing. Furthermore, it noted that tightening financing conditions are increasingly dampening demand, a crucial factor in achieving the target inflation rate.

In terms of economic growth, the central bank has lowered its expectations, anticipating a substantial contraction in the euro area’s economic growth. Projections indicate a growth rate of 0.7% for this year, followed by a modest 1.0% in 2024.

Rising interest rates set by central banks, including the European Central Bank and the Federal Reserve, have had a significant impact on various asset classes, including stocks and cryptocurrencies, since last year. In March 2023, Bitcoin briefly surged above $30,000 following the launch of the Federal Reserve’s Bank Term Funding Program (BTFP), designed to provide liquidity support to banks at risk of contagion following the failure of Silicon Valley Bank.

While the prevailing sentiment suggests that Bitcoin is likely to rebound once central banks reverse their tightening policies, BitMEX co-founder Arthur Hayes holds a different view. He argues that Bitcoin can thrive in both high and low-interest rate environments. In a recent blog post, he explained how the unique economic circumstances are causing real yields on bonds to remain negative despite rising interest rates, potentially making risk assets like Bitcoin more appealing for yield-seeking investors.