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ECB Rate Cut Could Spur Bitcoin and Stablecoin Growth in Eurozone, Experts Highlight
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The European Central Bank (ECB) today cut interest rates by 0.25%, the first cut in five years and reducing it to 3.75%. Crypto industry experts shared with Crypto Briefing that this move is important for different reasons, as it raises important questions about stablecoins in the European Union and the demand for Bitcoin in the eurozone.
Aurelie Barthere, principal research analyst at Nansen, explained that the ECB’s rate cut has already been priced in by markets, so investors should not be in for any surprises.
“In general, the ECB has less influence than the Fed in crypto markets, and the ECB follows the Fed, not the other way around. The reason why the ECB cut before the Fed is the weakness of growth in the eurozone compared to the US”, added Barthere.
As reported via the BBC, Christine Lagarde, president of the ECB, said the outlook for inflation had improved “appreciably”, paving the way for a rate cut. However, Lagarde warned investors to keep their hopes in check, as inflation could average 2.5% in 2024 and the ECB will maintain interest rate policy “sufficiently restrictive for as long as necessary.” ”.
However, the ECB’s decision could indirectly benefit the crypto market, highlighted Eneko Knörr, CEO of Stabolut. “While European economic policies may not have a direct influence on global crypto trends, lower interest rates generally drive investors into higher-risk, higher-return assets,” he explained.
As a result, crypto could become more attractive as investors seek better yields. Therefore, the rate cut could increase interest in cryptocurrencies as part of a broader quest for higher returns.
Furthermore, Bitfinex analysts assessed that this measure aims to stimulate economic growth in a context of signs of slowdown in the euro zone, although this could weaken the euro. This is good news for crypto, as investors in the European Union may increase their demand for alternative assets like Bitcoin. “The increased liquidity resulting from this monetary easing could also support risky assets, including cryptocurrencies.”
Kevin de Patoul, CEO of Keyrock, also believes rate cuts are a bullish signal for markets with higher risks and potential returns. Furthermore, the stablecoins sector in the eurozone could witness a significant impact.
“This move raises important questions about the future of EURO stablecoins, especially in light of the Markets in Crypto Assets (MiCA) regulation coming into force in June. The rate cut could significantly impact the financial outlook of EURO stablecoin issuers.”
Pondering whether this decision affects next week’s FOMC meeting in the US, Knörr stated that the Fed’s decisions are largely irrelevant to the ECB’s actions, and vice versa. However, the ECB’s rate cut could signal to markets that inflation concerns may be easing.
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