The U.S. Federal Reserve has emerged as one of the most influential entities in the bitcoin market in the wake of the coronavirus pandemic. What’s not clear are the roles of other major central banks, including the European Central Bank (ECB) and Bank of England (BOE).

According to Noelle Acheson, head of market insights at CoinDesk’s sister company Genesis Global Trading, those banks’ actions matter to traders holding cryptocurrencies in euros, the official currency of 19 of the 27 member states of the European Union (EU), and the British pound.

“We’re so used to watching crypto in dollars; we forget that for many, performance is decided by relative movements in local currencies,” Acheson told CoinDesk in a Telegram chat. “Also, many traders borrow in local currencies to trade, so higher borrowing costs will eat into their profits.”

The BOE raised official borrowing costs by 25 basis points to 0.5%, matching estimates. The central bank’s policy statement showed four members voted for a 50 basis-point hike, signaling the potential for a faster tightening than historical standards. Officials unanimously voted to begin shrinking the balance sheet.

Bitcoin barely moved after BOE’s rate decision and remained steady near $36,600, having dipped over 4% on Wednesday. The central bank was widely expected to raise rates by 25 basis points, while pushing back against market expectations of a total of five quarter-percentage-point hikes by end-2023.

“Most were already discounting a raise from the BOE, but not the ECB,” Acheson said.

The ECB’s decision is due at 12:45 UTC. The central bank is under pressure to explain its view on inflation, according to FXStreet.

Europe has been a major source of demand for bitcoin and cryptocurrencies. Both the ECB and BOE have contributed to the two-year global liquidity deluge commonly associated with the Fed and have fueled unprecedented risk-taking in financial markets.

Data tracked by ByteTree Asset Management show the number of bitcoin held by U.S. and Canadian closed-ended funds and Canadian and European exchange-traded funds (ETFs) has risen 165% since early 2020 to 842,153 BTC.

A Chainalysis report released in October mentioned Europe as the world’s largest crypto market. “Central, Northern, & Western Europe (CNWE) has the biggest cryptocurrency economy in the world, receiving over $1 trillion worth of cryptocurrency over the last year, which represents 25% of global activity,” the blockchain analytics firm said.

Together, the Fed, the ECB, BOE, the Swiss National Bank (SNB) and the Bank of Japan (BOJ) have $27 trillion worth of assets, according to Bloomberg. That’s up from $14 trillion at the start of 2020.

“Broader monetary policy trends do matter for the medium term as it sets the tone for global liquidity and global risk appetite,” Ilan Solot, partner at the Tagus Capital Multi-Strategy Fund, said in a Telegram chat.

Fed rules the roost

While advanced nation central banks have worked in tandem to flood the global economy with cash, the Fed sets the worldwide narrative and draws the most attention from financial markets.

“While all macro decisions matter, the Fed is the most important as it drives the global policy,” said Charlie Morris, CIO of ByteTree Asset Management.

The Fed is widely seen as the lender of the last resort due to the dollar’s global reserve status, as explained in the Council on Foreign Relations’ article dated September 2020. The popular theory states that the dollar’s reserve status ensures constant demand for the greenback in the global market. That allows the Fed, in theory, to print to infinity without worrying about sharp currency depreciation and a surge in inflation.

The U.S. central bank has taken a sharp hawkish turn since November, retiring the word “transitory” from inflation discussions, setting the stage for at least four interest rate hikes this year and an end to the liquidity-boosting bond-buying program in March.

Bitcoin, widely touted as an inflation hedge, has declined by 45% since mid-November, predominantly due to the Fed jitters.

Speculation of global tightening has been doing the rounds since the Fed’s hawkish turn. Surprises from the ECB, if any, may not have a significant negative impact on bitcoin.

“We are expecting the ECB to acknowledge the short-term inflationary pressure (Jan CPI 5.1% vs. 4.4% expected). However, we view it as unlikely that a move on rates will occur today,” Matthew Dibb, COO and co-founder of Singapore-based Stack Funds, said. “Markets are generally factoring in a hike around June/July; however, a surprise is possible.”

On the flip side, the battered cryptocurrency may see a relief rally if the ECB squashes fears of aggressive monetary policy tightening, though the central bank has little room to do so given inflation is running at multiyear highs. “If ECB and BOE do not pull the trigger, this will offer up some short-term tailwinds with the price of bitcoin,” said Laurent Kssis, a crypto exchange-traded fund (ETF) expert and director of CEC Capital.

Overall, the environment for risk assets, including bitcoin, is gloomy, according to Pankaj Balani, CEO of Delta Exchange. “The cryptocurrency could continue to trade sideways until bottom fishing emerges,” Balani told CoinDesk in a WhatsApp call. “That looks unlikely as long as macro factors remain bearish.”

UPDATE (Feb. 3, 12:23 UTC): Updates with BOE’s rate decision; removes “Preview” from headline.