European Central Bank May Boost Bitcoin

Following seven consecutive months of easing inflation in the eurozone, the ECB is widely expected to reduce interest rates by 0.25%, and Bitcoin inflows may increase this week due to a significant monetary policy decision in the European Union

This week, Bitcoin inflows may increase due to a significant monetary policy decision made by the European Union.

On June 6, the European Central Bank (ECB) is anticipated to reduce interest rates by 0.25% to 4.25%. The reduction in interest rates may increase investor interest in high-risk assets like Bitcoin BTC$69,751, according to Jag Kooner, Bitfinex’s director of derivatives. Kooner disclosed to Cointelegraph:

“The European Central Bank is expected to cut interest rates next week to stimulate economic growth. Lower rates typically weaken the euro and increase liquidity, which can boost risk assets, including Bitcoin.”

Anticipated rate reductions occur amid a phase of decelerating inflation in Europe. The headline Consumer Price Index (CPI) for May is expected to register at 2.6%, which could represent the eighth consecutive month in which inflation falls below the 3% threshold.

Bullish outlook: Bitcoin will appreciate in tandem with equities.
James Wo, the founder and CEO of DFG, opined that the prospective reduction in interest rates might stimulate conventional equity markets and accelerate Bitcoin’s ascent.

Wo communicated with Cointelegraph:

“Cutting of interest rates will impact traditional equities positively, as seen from how European stocks rose after dovish comments from the ECB Governing Council earlier in May. This might translate to a shift in liquidity to more risk-on assets such as Bitcoin as well, boosting its price.”

Bitcoin’s price increased in May, as did the STOXX 600 and DAX 40, two of Europe’s most prominent stock indices. The DAX 40 increased by 3.8%, the STOXX 600 increased by 3.3% over the previous thirty days, and the price of Bitcoin increased by 17.4%, per TradingView.

In contrast, Bitcoin becomes “digital gold” and decouples from equities.
The historical correlation between Bitcoin and the conventional stock market has been inconclusive. Nevertheless, Bitcoin might appreciate in tandem with the stock market during a stimulus-driven economic climate. Kooner disclosed to Cointelegraph:

“Historically, Bitcoin has shown a mixed correlation with equities. During economic stress, Bitcoin often mirrors stock market trends as investors liquidate assets. In a stimulus-driven environment with lower rates, Bitcoin may benefit alongside equities due to increased liquidity.”

Despite the sluggish equity market in the largest economy in the world, the United States, the price of Bitcoin posted a significant increase this year. Bitcoin’s price increased by over 57.6% year-to-date (YTD), whereas the S&P 500 index surged by over 11.5% YTD.

“While US equities have retraced, BTC has remained strong. It remains to be seen if this is crypto lagging or relative strength,” added Kooner.